MONTHLYDIGESTOFCASELAWS(JANUARY2012) (JournalsReferred:ACAJ/BCAJ/BLR/CITC/CTR/DTR/ITD/ITR(Trib.)/ITR/SOT/TTJ /TLR/Taxman/Taxation/TaxWorld,www.itatonline.org) S.2(1A)(b)(ii): Agricultural incomeConversion of raw peas in to pea seeds constitute agriculturalincome.

e. Assesseewhoisengagedincultivatingandgrowingrawpeasandalsointheprocessofconverting them into pea seeds so as to render them fit for sale nd also selling seeds in the market and to variousgodowns.Incomederivedfrompeaseedsconstitutedagriculturalincome.(A.Y.199798) CITv.RanaGurjitSingh(2012)340ITR108(P&H)(HighCourt) S. 2(14): Capital assets Capital gains Controlling interest can not be treated as capital asset(S.45) Controllinginterestisnotanidentifiableordistantcapitalassetindependentofholdingofshares andthereforedoesnotsatisfydefinitionofacapitalassetwithinthemeaningofsection2(14).On thefactsextentofcontrolofparentisnomorethanapersuasiveposition,itisnotbeingalegally enforceablerightcannotbetreatedasacapitalassetwithinthemeaningofsection2(14). VodafoneInternationalHoldingsB.V. v.UOI(2012)341ITR1/247CTR1/66DTR265/ 204Taxman 408(SC) S.2(14):CapitalassetsAgriculturallandBarrenlandisnotagriculturallandhenceliableto capitalgains.(S.45) Assessee sold the land and claimed the exemption on the said transaction treating the same as agricultural land. Tribunal held that land in question was a barren land surrounded by rocky mountains and not fit for agricultural operations. Sale of the said land was not for agricultural purposebutforpurposeofconstructionofflats,thereforethelandinquestioniscapitalassetand liabletocapitalgainstax.(A.Ys.200203to200708). SureshKumarD.Shahv.Dy.CIT(2012)49SOT341(Hyd.)(Trib.) S.2(28A):InterestAllotmentofflatsDelayedpaymentisnotinterest. Interest on amount deposited by allotment on account of delayed allotment of flats does not fall undersection2(28A). CITv.H.P.HousingBoard(2012)340ITR388(HP)(HighCourt) S. (2)(28A): Interest Official liquidator Lump sum consideration is received can not be assessedasincomefromothersources,itisassessableascapitalgains.(S.45,56) Theamountreceivedbytheofficialliquidatorintermsofordersofcompanycourt,thoughreferred toasinterest,forthepurposeofassessmentofincometaxitwaspartofthesaleconsiderationand therefore, could not be treated as income from other sources under section 56, the amount is assessableascapitalgainsundersection45.(A.Y.199596) CauverySpinningandweavingMillsLtd.(Inliquidation)v.Dy.CIT(2012)340ITR550(Mad.)(High Court) S.2(47)(v):TransferPossessionofimmoveablepropertybywayofleaseonfactsheldisnot transferTransferofPropertyAct,1982.(S.45) 1 http://www.itatonline.org

 Possession of the mill was transferred to the purchaser by way of lease and not in terms of the TransferofPropertyAct.Therefore,therewasneitheractualtransfernorartificialtransferoftitle on account of the transfer of possession. Such transfer of title took place only on payment of the entire amount by the purchaser and only after the sale certificate was issued by the competent court.(A.Y.199596) Cauvery Spinning and weaving Mills Ltd (In liquidation) v. Dy. CIT (2012) 340 ITR 550 (Mad.)(High Court) S.4: Income ChargeableSubsidiary and its parent are totally distinct tax payer, profits assessableonstandalonebasis. Subsidiaryanditsparentaretotallydistincttaxpayersandthereforeentitiessubjecttoincometax are taxed on profits derived by them on stand alone basis, irrespective of their actual degree of economic independence and regardless of whether profits are reserved or distributed to share holders / participants. Principle of Lifting of corporate veil can be applied in cases of holding companysubsidiary relationship, where, in spite of being separate legal personalities, if facts revealthattheyindulgeindubiousmethodoftaxevasion. VodafoneInternationalHoldingsB.V.v.UOI(2012)341ITR1/204Taxman408/247CTR1/66DTR 265(SC) S.4:IncomeCapitalorrevenueNoncompetefeeiscapitalreceipt. Noncompete fee received by the assessee prior to 1stApril 2003, has to be treated as capital receipt.Departmenthasnotdoubtedthegenuinenessoftransactionbeforelowerauthorities,hence theTribunalcannotcontendbeforetheHighCourtthatthetransactionissham.(A.Y.199798) HariShankarBhartiav.CIT(2012)65DTR380(Cal.)(HighCourt) S.4: Income Undisclosed income Search and seizureOn money Paper seized from third partyadditionisdeleted.(S.132) Inthecourseofsearchandseizureactionagainstthirdparty,fromtheDirectorofthesaidcompany certainloosepaperswereseizedwhichrecordedtheallegedpaymentstoartists.Oneofthename was of the assessee. On the basis of said paper the assessment of the assessee was reopened. AssessingOfficertreatedthesaidamountofRs.20lakhsasundisclosedincomeofassessee.Inthe course of cross examination the director of the company has stated that he did not recollect the yearofpaymenteither1996or1999northepersontowhomhehasgiventhemoney.TheTribunal heldthatunderthecircumstancesthestatementsgivenbyDirectornoevidentiaryvaluehencethe additioncouldnotbetaxedintheassessmentyear19992000.(A.Y.19992000). SaifAliKhanMansuraliv.ACIT(2012)13ITR204(Mum.)(Trib.) S.4:IncomeCapitalorreceiptSalestaxsubsidyiscapitalreceipt. SubsidygivenunderdispersalofIndustriesschemeasincentivetosetupindustriesinareasother thanMumbai,PuneandThaneiscapitalreceipt.(A.Ys.200405,200506,200607). Dy.CITv.CosmoFilmsLtd.(2012)13ITR340(Delhi)(Trib.) S.4:IncomeCapitalreceiptTDRGainsonhousingsocietyredevelopmentisnottaxableit isacapitalreceipt.[S.2(24)] Theassesseewasthememberofahousingsociety.Thehousingsocietyanditsmembersentered into an agreement with a developer pursuant to which the developer demolished the building owned by the housing society and reconstructed a new multistoried building by using the FSI 2 http://www.itatonline.org

 arisingoutofthepropertyandtheoutsideTDRavailableunderDevelopmentControlRegulations. The assessee, as a member of the housing society, received a larger flat in the new building, displacementcompensationofRs.6lakhs(atRs.34,000/p.m.fortheperiodofconstructionofthe newbuilding)andadditionalcompensationofRs.11.75lakhs.TheAssessingOfficer &CIT(A)held that the said additional compensation was assessable as income in the assessees hands. On appealbytheassessee,heldallowingtheappeal: In principle, though the scope of income in section 2(24) is very wide, a capital receipt is not chargeabletotaxasincomeunlessthereisaspecificprovisiontothateffect.Astheresidentialflat ownedbytheassesseeinthesocietysbuildingwasacapitalassetinhishands,thecompensation was a capital receipt. The departments argument that the cash compensation was a share in profitsearnedbythedeveloperisnotacceptablebecauseitproceedsonthefallacythatthenature ofpaymentinthehandsofthepayerdeterminesthenatureinthehandsoftherecipient.However, as the said receipt reduced the cost of acquisition of the new flat, it had to be taken into when computingthegainsfromatransferthereofinthefuture. KushalK.Bangiav.ITO(Mum.)(Trib.)www.itatonline.org S.4:IncomeDiversion by overriding titleInfrastructure fund retained can not be held as diversionbyoverridingtitle. Assessee is a development authority created under the provisions of UP Urban Planning & Development Act, 1973. 90 percent of the amounts collected by the assessee by way of development fees, conversion charges of land user, stamp duty and fees on regularization of colonieswereretainedintheinfrastructurefundaccount.Asperofficememorandumassesseehas been power to collect the fees charges and functioning. The amount collected by office memorandumnotbeingaseparateindependententityoftheassesseeandthesaidmemorandum having not created any overriding title of the State Government at source of collection of the specifiedfees/charges,whichhavetobeappliedtowardsfulfillmentofassesseesobject,thereis no diversion of income by overriding title as regards the amounts credited to the infrastructure fund.(A.Y.200607&200708) Mussore Dehradun Development Authority v. Addl. CIT (2012) 65 DTR 297 / 143 TTJ 395 (Delhi)(Trib.) S.5:IncomeAccrualNonresidentTransferofsharesofforeigncompanybynonresident tononresidentdoesnotattractIndiantaxevenifobjectistoacquireIndianassetsheldby theforeigncompanyRepresentativeassessee.Incomecannotbeassessed[S.9(1)(i),195, 163(1)]

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 Share holding in companies incorporated outside India is property located outside India. Where such shares became subject matter of off shore transfer between two nonresidents, there is no liabilityforcapitalgainstax.Onthefactsofcasethetransactionofoutrightsalebetweentwonon residents of a capital asset (share) outside India. Further, the transaction was entered in to on principal to principal basis. Therefore, no liability to deduct tax at source. In the absence of permanent establishment, profits were not attributable to Indian operations. More so ever, tax presence has to be viewed in the context of the transaction that is subjected to tax and not with referencetoanentirelyunrelatedmatter.Taxpresencemustbeconstruedinthecontextandina matterthatbringsthenonresidentassesseeunderthejurisdictionoftheIndiantaxauthorities.On the facts the revenue failed to establish any connection with section 9(1)(i). Under the circumstances, section 195 is not applicable. Sections 163(1)(c) and 9(1)(i) have to be read together. Section 163(1)(c) is not attracted as there was no transfer of capital asset situated in India, consequently Vodafone International Holdings cannot be proceeded against even under section163oftheActasrepresentativeassessee. Vodafone International Holdings B.V. v. UOI(2012)341 ITR 1/247 CTR 1/66 DTR 265/ 204 Taxman 408(SC) Editorial:DecisionofBombayHighCourtinVodafoneInternationalHoldingsB.V.v.UOI(2010)329 ITR126(Bom.)(HighCourt)issetaside. S.5:IncomeAccrualPrincipleofrealincomeEvenundermercantilesystemofaccounting mereraisingofproformainvoiceincomedoesnotaccrue. OnadviceoftheComptrollerandAuditorGeneralofIndia,theassesseehadbeenraisingproforma invoices/bills,evenwhennomoneywasreceivedtherespectofthosebillsasincomeofassesseeon thegroundthatassesseewasfollowingthemercantilesystemofaccounting,therefore,incomehad accrued very fact that spaces were given to those agencies and against those spaces pro forma invoices/billswereraised.Therewassomedisputesandsomeofdepartmentshadnevermadeany payments,hencenoincomeaccruedmerelybecauseproformaadviceswereraisedthattooatthe instanceoftheComptrollerandauditorGeneralofIndia.ThematterwasremittedtotheAssessing Officertoexaminethematteronthemerits.(A.Y.199899) Airports Authority of India v. CIT (2012) 340 ITR 407/247 CTR 149/66 DTR 440 (Delhi)(FB)(High Court) S.5: Income Accrual Commission Foreign agentsCommission which is reduced from invoicevaluecannotbeassessedasincomeitisinthenatureofdiscount. Assesseewasengagedinbusinessofexportoffabrics.Assesseeallegedlyclaimedthedeductionas commission expenses paid to foreign agents. On enquiry by the Assessing Officer the assessee contendedthatthesaidamountwasreducedfromtheinvoiceitselfthereforeitisdiscountgivento buyer.TheAssessingOfficerdisallowedthecommission.OnappealtheTribunalheldthatwhenthe alleged commission was deducted from invoice value and only net amount was received by assesseefrombuyer,amountofcommissionrecordedininvoicecouldnotbetreatedasinincome arisingtoassessee.(A.Y.200506) RajeshManikchandJainv.ITO(2012)49SOT167(Ahd.)(Trib.) S.5:IncomeaccrualNonrealisationofsurchargeMethodofaccountingCashMercantile Levyofsurchargebeingcontingenttaxcanbeleviedonlywhenrealizedandnotonthebasis ofaccrual.(S.145) 4 http://www.itatonline.org

 AssesseeaPSU,engagedindistributionofelectricitywhichmaintainedtheaccountsonmercantile system.Onthebasisofprudencenormsthemethodofaccountingwaschangedandthesurcharge wasaccountedonthebasisofactualreceipt.Thelevyofisnotmandatoryenforceablebyassessee at the time of payment of bill. The court held that the receipt of surcharge is purely contingent hencetaxcanbeleviedonlyontherealizedincomeandnotonhypotheticalincome.(A.Y.200607) Dy.CITv.DakshinHaryanaBijliVitranNigamLtd.(2012)65DTR288(Delhi)(Trib.) S.6:ResidenceinIndiaNonresidentSubsidiariescannotbetreatedasdeemedresident. Mere fact that a parent company exercise shareholders influence on its subsidiaries does not generally imply that subsidiaries are to be deemed residents of State in which parent company resides. VodafoneInternationalHoldingsB.V. v.UOI(2012)341ITR1/204Taxman 408/247CTR1/66DTR 265(SC) S.9(1):IncomedeemedtoaccrueorariseinIndiaTransferofsharesofforeigncompanyOff shoretransactiontaxauthoritiesinIndiahasnojurisdictiontospiltthepayment.. Appellant company, namely Vodafone International Holdings BV(VIH), was resident for tax purposes in Netherlands. A sale purchase agreement (SPA) was entered between appellant and HTIL under which HTIL agreed to transfer to appellant its entire issued share capital in CGP and therebyentireinterestofHTILinHELwastransferredtoappellant.HighCourtheldthatVIHon purchaseofCGPgotindirectinterestinHEL,acquiredcontrollingrightincertainindirectholding companies in HEL, controlling rights through shareholder agreements which included right to appointdirectorsincertainindirectholdingcompaniesinHEL,rightstouseHutchbrandinIndia, etc., which all constituted capital asset as per section 2(14). High Court further held that VIH by virtueofitsdiverseagreementshadnexuswithIndianJurisdictionandhenceproceedingsinitiated undersection201forfailuretowithholdtaxbyVIHonpaymentsmadetoHTILcouldnotbeheld lackofjurisdiction.OnfactsitwasnotedthatinvestmentintoIndiabyaholdingcompany(Parent company),HTIL through a maze of subsidiaries. It was also apparent that transaction involved outrightsalebetweentwononresidentcompaniesofacapitalasset(Shares)outsideIndia.Since thepartiestotransactionhadnotagreeduponaseparatepriceforCGPshareandforHighCourt calledasotherrightsandentitlements(Includingoptions,righttononcompete,controlpremium, customer base, etc.) it was not open to Revenue to split payment and consider a part of such payments for each of above items. Even otherwise, since there was an off shore transaction betweentwononresidentcompaniesnamely,HTILandVIHandsubjectmatteroftransactionwas transfer of CGP (another nonresident company),Indian tax authorities had no territorial jurisdictionundersection9(1)(i)totaxsaidoffshoretransaction.AccordinglytheSupremeCourt setasidetheorderofHighCourt. Vodafone International Holdings B.V. v. UOI(2012)341 ITR 1/ 204 Taxman 408/247 CTR 1/66 DTR 265(SC) S.9(1)(vi):IncomedeemedtoaccrueorariseinIndiaRoyaltiesFeesforincludedservices Deduction at source Nonresident DTAA IndiaUSAAssessee is held liable to deduct at source.(S.195,Article12) AssesseeobtainedordersfromDepartmentofTelecommunicationsformanufactureandsupplyof telecommunications/switching equipments. In order to execute its orders in India it had placed orders on L Technologies, USA for supply of software. Assessee also placed order with L Technologies,Taiwanforsupplyofhardware.AssessingOfficertookaviewthatpaymentmadeto 5 http://www.itatonline.org

 L Technologies USA for supply of software were in the nature of royalty under provisions of section 9(1)(vi) read with DTAA between India and USA and thus the assessee was required to deducttaxatsourceundersection195.OnappealTribunalheldthatacquisitionofsoftwarewithout hardware did not serve any purpose hence, payment made to L Technologies, USA could not be termedasroyaltyandnotliabletodeductionatsourceasitwasanintegratedimportcouldnotbe sustained. In an appeal before the High Court, by revenue High Court upheld the view of the AssessingOfficer.(A.Ys.200001,200202&200203) CITv.SunaryComputers(P)Ltd.(2012)204Taxman1(Karn.)(HighCourt) S. 9(1)(vii): Income deemed to accrue or arise in IndiaEven if not assessable as fees for technicalservicesunderDTAA,barinsection44Dagainstdeductionofexpenseswillapply. The assessee, an Australian company, set up a permanent establishment (PE) in India to render technical services for evaluation of coal deposits and conducting feasibility studies for transportationofironore.TheAssessingOfficer&CIT(A)heldthatthepaymentsreceivedbythe assesseeweretaxableasfeefortechnicalservicesundersection9(1)(vii)readwithsection115A on a gross basis without any deduction in view of section 44Dat the rate of 20%. On appeal, the Tribunal(RioTintoTechnicalServicesv.Dy.CIT(2010)39DTR327(Delhi))heldthatastheassessee had a PE in India, the receipts were chargeable to tax as business profits after deduction of expenses under Article 7 of the DTAA and section 44D & 115A did not apply. On appeal by the department,HELDpartlyreversingtheTribunal: (i)AstheassesseehadaPEinIndiafromwhichtheincomearose,theincomewaschargeabletotax as business profits under Article 7 of the DTAA and not as fees for technical services under Article12; (ii)Article7(3)permitsadeductionofexpenditureinaccordancewithandsubjecttolimitationsof the law relating to tax in India including executive and general administrative expenses so incurred regardless whether they have incurred in India or elsewhere. The words in accordance with and subject to limitation of the law relating to tax applies not only to the executive and generaladministrativeexpensesbuttoallexpenditure; (iii) The income received by the assessee, though not assessable as fees for technical services undertheDTAA,isfeesfortechnicalservicesunderExplanation2tosection9(1)(vii)becauseitis forprovidingtechnicalinformationanddoesnotarisefromaproject.Consequently,section44D, whichprovidesthatnodeductionshallbeadmissiblewhilecomputingincomeofthenatureoffees fortechnicalservicesshallapply. DITv.RioTintoTechnicalServices(Delhi)(HighCourt)www.itatonline.org S. 9(1)(vi): Income deemed to accrue or arise in India Copyright HardwareSoftware SoftwaresuppliedbeinganintegralpartofthemobiletelephonesystemOnfactsitisheld asnottaxableinIndia.DTAAIndiaSweden.(S.5(2)(b),Art.13) AssesseeaSwedishcompany,suppliedhardwareandsoftwaretoanIndiancellularoperatorunder supplyagreementwherebyboththetransferofthepropertyinthegoodsandriskpassedoutside India, and the installation activity having been carried out by two separate companies, though belongingtothesamegroup,whichreceivedseparateremunerationandhavebeenindependently assessed, in respect of their income, assessee did not have any business connection in India and therefore,notaxableeventookplaceinIndia.Softwaresuppliedbytheassesseebeinganintegral partoftheGSMmobiletelephonesystemincapableofindependentuseandtherebeingnothingto establish that the cellular operator has obtained any copy right of such software, no part of the paymentreceivedbytheassesseeundersupplyagreementcanbeclassifiedasroyaltyeitherwithin 6 http://www.itatonline.org

 themeaningofsection9(1)(vi)orunderArticle13(3)oftheDTAAbetweenIndiaandSweden.(A.Y. 199798) DITv.EricssonA.B.(2012)66DTR1/246DTR422(Delhi)(HighCourt) DITv.EricssonRadioSystemA.B.(2012)66DTR1/246DTR422(Delhi)(HighCourt) DITv.MetapathSoftwareInternationalLtd.(2012)66DTR1/246DTR422(Delhi)(HighCourt) S. 9(1)(vi): Income deemed to accrue or arise in India Royalty Business profitsSoftware royalty Shrink Warp application softwareBusiness profitsPermanent establishment Viewinfavourofassesseeshouldbefollowed. The assessee sold shrinkwrap application software called Solidworks 2003 to customers in Indiaandclaimedthatthesamewasbusinessprofitsandnotassessabletotaxasitdidnothavea PE in India. The Assessing Officer held that the income was assessable to tax as royalty under section9(1)(vi)/Article12(3)thoughtheTribunal(foranearlieryear)reverseditontheground that the product was a copyrighted article and not copyright. Before the Tribunal, the departmentclaimedthattheearlierviewshouldnotbefollowedinviewofSamsungElectronicsCo. Ltd.v.CIT(2011)203Taxman477(Karn.)whiletheassesseereliedonDITv.EricssonAB(2012)204 Taxman192(Delhi).HeldbytheTribunal: ThedepartmentsargumentthatDITv.EricssonAB(2012)204Taxman192(Delhi)wasconfinedto acasewherethesoftwarewasembeddedtotheequipmentisnotcorrect.TheCourtdidholdthat consideration paid merely for right to use cannot be held to be royalty and the ratio would also applywhenshrinkwrapsoftwareissold.Wheretwoviewsarepossible,theviewinfavourofthe assesseehastobepreferred.Thisprincipleisapplicabletononresidentassesseesaswellinview of Article 24(1) of the DTAA (nondiscrimination) which provides that nationals of a Contracting StateshallnotbetreatedlessfavorablythanthenationalsoftheotherContractingState. Dy.DITv.SolidWorksCorporation(Mum.)(Trib.)www.itatonline.org S.9(1)(vii): Income deemed to accrue or arise in India Royalties Fees for technical servicesReimbursement of expenses No obligation to deduct at source DTAA IndiaUK. (Art.13) TheassesseeisamanufacturerofautomobileproductsinIndia.LDVisaresidentofUKandisalso in the business of manufacturing of automobiles in UK. The assessee and LDV had proposals for jointventureintheareaofautomobilemanufacture.LDVwantedtodomarketresearchtofindout the potential market for different vehicles and consumer preferences. LDV carried out market research and raised invoice on assessee. Assessee remitted certain amount to LDV without deductingtaxatsource.Lowerauthoritiesheldthatthepaymentwasnotconfinedtoonlymarket research but to provide technical assistance in improving quality of their minibus and to move towardsfullyengineeredminibusandtherefore,amountinquestionwaspartoffeesforrendering technical services by LDV liable to deduct tax at source. Tribunal held that since LDV merely conducted market research on acceptability of possible market for its product in India, and no technicalservicewasbeingmadeavailabletoassessee,paymentinquestionwasreimbursementof expensesandwasnotinnatureoffeesfortechnicalservicesascontendedbyrevenue,hence,there isnoobligationtodeducttaxatsource.(A.Y.199899) Mahindra&MahindraLtd.v.ADIT(2012)134ITD312(Mum.)(Trib.) S.10(15):Exempt incomes InterestForeign currency loansWithdrawal of exemption by GovernmentInterestpaymenttononresidentisexempt. 7 http://www.itatonline.org

 Assessee had raised foreign currency loans in form of External Commercial Borrowings (ECBs) towards part of financing its import of capital goods and services. ECBs were duly approved by GovernmentofIndia.Ascertainconditionsofapprovalwereviolated,approvalwaswithdrawnand exemptionavailableundersection10(15)(iv)(f)wasalsowithdrawn.Subsequently,assesseemade payment of interest to nonresident lenders and claimed exemption under section 10(15)(iv)(f). Assessing Officer rejected the claim. On appeal the Commissioner (Appeals) held that exemption withdrawnbyCentralGovernmentholdinginterestasnotexemptundersection10(15)(iv)(f)was tobeignoredanditwasheldthatinterestpaymentbyassesseetononresidentlendersasperECB loan approved by Central Government would continue to be exempt. The Tribunal confirmed the viewofCommissioner(Appeals).(A.Ys.200203&200405) ADITv.RelianceIndustriesLtd.(2012)49SOT181(Mum.)(Trib.) S.10(20):Exemption Local authorityHimachal Pradesh Marketing Board is not local authorityhencenotexemptGeneralClausesAct,1897.[S.3(31)] H.P.MarketingBoardconstitutedundersection3oftheH.P.AgriculturalProduceMarketsAct,1969 is not a local authority hence not exempt under section 10(20).The phrase local authority is interpretedinthiscaseonlyinthecontextofsection3(31)oftheGeneralClausesAct,1897,since theassessmentyearsinquestionareforaperiodpriortotheamendmentofsection10(20)ofthe IncometaxAct,wherebyExplanationdefininglocalauthorityforthepurposewasaddedbythe FinanceActof2002. CITv.H.P.MarketingBoard(2012)66DTR124/246CTR535(HP)(HighCourt) S. 10(23C)(vi):ExemptionEducational institutionMust be given an opportunity if commissionerdesirestouseevidenceagainstanassesseeNaturaljustice. The Commissioner must give an opportunity to the assessee to if he desires to use the evidence collected against the assessee through reports of subordinate authorities. On the facts the court heldthatorderpassedbyChiefCommissionerdenyingapprovalundersection10(23C)(vi),relying uponcertainadversematerialwithoutsupplyingthesametothepetitionerandwithoutallowing anopportunityofrebuttalthereofdoesnotfullymeettherequirementoffulfillmentofprinciples ofnaturaljusticeandtherefore,itcanbesustained.ThematterwassetasidetotheCommissioner todecideafresh. RastraSahayakVidyalayaSamitiv.CCIT(2012)246CTR154(Raj.)(HighCourt) S.10(23C)(vi):ExemptionEducationalinstitutionTeachingandpromotingallformsofmusic anddancewesternIndianoranyotherisentitledtoexemption. Assesseesocietywhichisteachingandpromotingallformsofmusicanddance,western,Indianor anyotherformandisrunlikeschooloreducationalinstitutioninasystematicmannerwithregular classes, vacations, attendance requirements, enforcement of discipline and so on meets the requirement of educational institution within the meaning of section 10(23C)(vi). High Court quashed the order of prescribed authority and directed to pass the order by giving a reasonable opportunity.(A.Y.201011) DelhiMusicSocietyv.DIG(2012)65DTR337/246CTR327(Delhi)(HighCourt) S.10(29):ExemptionMarketingauthoritiesLettingofgodownsisentitledtoexemption. Assessee society, constituted under Airports Authority of India Act, 1994 which was engaged in letting out godowns and warehouses at airports for storage, processing or facilities marketing of commoditieswasentitledtoexemption.(A.Ys.199596,199798to200102) 8 http://www.itatonline.org

 AirportsAuthorityofIndiav.CIT(2012)134ITD34(Delhi)(Trib.) S.10A:Exempt incomes Export oriented undertaking Software development Shifting of unittodifferentStateConsistencymethodmaybeaccepted.. Assessing Officer has accepted the head count method adopted by the assessee for allocation of indirect expenses between STP unit and non STP unit in the past but has rejected it only for the years, under appeal, it would disturb or distort the profits; method adopted by the assessee has been consistently accepted by the departmental authorities and there being no just cause for abandoningthesameitcouldnotbedisturbed.(A.Y.200102&200203) CITv.EhptIndia(P)Ltd.(2012)65DTR187/246CTR217(Delhi)(HighCourt) S.10A:ExemptincomesExportorientedundertakingUnabsorbedlossesDepreciationfrom earlier year Loss of non STP unit cannot be set off against income of section 10A unit. [S. 32(2),72(2)] Incomeofsection10Aunithastobeexcludedatsourceitselfbeforearrivingatgrosstotalincome, the loss of non section 10A unit cannot be set off against the income of section 10A unit. Exemptionundersection10A,hasto be allowed withoutsetting off broughtforwardunabsorbed lossesanddepreciationfromearlierassessmentyearorcurrentassessmentyeareitherinthecase of non STP units or in the case of very same undertaking. The Court observed that when section 10A,wasrecastbytheFinanceAct,2000,theParliamentwasawareofthecharacterofreliefgiven inChapterIII.Chapterdealswithincomeswhichdonotformpartoftotalincome.Iftheparliament intended that relief under section 10A should be by way of deduction in the normal course of computation of total income,it could have placed the same in Chapter VIA, which houses the sections like section 80HHC, 80IA, etc. The Parliament was aware of the various restrictions and limitingprovisionslikesection80A,section80AB,whichwereinChapterVIA,whichdonotappear inChapterIII.Thefactthatevenafterrecast,thereliefhasbeenretainedinChapterIIIindicatesthe intention of Parliament that it is to be regarded as an exemption and not deduction. This is supportedbyCircularNo.7of2003dt.5thSeptember2003(2003)263ITR(st)62.(A.Ys.200102to 200607) CITv.YokogawaIndiaLtd.&Ors.(2012)65DTR170(Karn.)(HighCourt) S. 10A: Exempt incomes Export oriented undertaking Computation Total turnover Expenditureincurredshouldnotbeincludedintotalturnover. TheassesseecompanyisengagedinthebusinessofCallCenteroperations.Theassesseeincurred expenses in foreign exchange towards communication expenses. While arriving at the total turnover, the assessee did not include the expenses incurred by it towards communication expenses. Assessing Officer held that no deduction is possible. The Tribunal relying on the judgmentof SupremeCourtinCIT v.Lakshmi MachineWorks(2007)290ITR667(SC)heldthat theexpenditureincurredshouldnotformpartoftotalturnoveranddirectedtheAssessingOfficer to recomputed the relief under section 10A of the Act, excluding the said communication charges fromexportturnoveraswellasfromtotalturnover.OnappealbytherevenuetheCourtheldthat for the purpose of computing exemption under section 10A when the export turnover in the numerator is to be arrived at after excluding communication expenses, the same should also be excluded in computing the export turn over as a component of total turnover in the denominator.(A.Ys.200102to200506) CITv.TataElxsiLtd.&Ors.(2012)65DTR206(Karn.)(HighCourt) 9 http://www.itatonline.org

 S. 10A: Exempt incomes Export oriented undertaking Sale of software STP Unit Exemptionisallowedthoughnotclaimedinthereturn. Assesseehadshowntheincomefromthesaleofsoftwareaslongtermcapitalgain.TheAssessing Officer held that the same is taxable as trading receipt. It was contended that if it was held to be trading receipt the same is exempt under section 10A. The Tribunal held that the assessee is entitledtoexemptionundersection10A.TheCourtheldthatconcurrentfindingwasarrivedbythe AssessingOfficer,AppellateAuthorityandTribunalthatincomefromsaleofsoftwarewastrading incomeandnotcapitalgainsafterestablishmentofSTPunit,theassesseeisentitledtoexemption undersection10A,thefactthattheassesseedidnotclaimexemptionundersection10Awhilefiling the return cannot come in the way of holding that assessee is entitled to benefit of section 10A,SinceitwasalternativelyarguedbeforetheAssessingOfficerandtheAppellateAuthoritythat if income is treated as trading receipt, exemption under section 10A may be granted.High Court upheldtheorderofTribunal.(A.Y.199798) CITv.InfosysTechnologiesLtd.(2012)65DTR271(Karn.)(HighCourt) S.10A:Exempt incomes Export oriented undertaking Pure gold converted into jewellery amountstoManufactureorproduction.(S.10B) Assessee received pure gold from a nonresident converted same into jewellery and thereupon exported it to said nonresident, activity undertaken by assessee amounted to manufacture or productionwhichqualifiedfordeductionundersection10A/10B.(A.Y.200708) CITv.LavleshJain(2012)204Taxman134(Delhi)(HighCourt) S.10B:ExemptincomesExportorientedundertakingReconstructionofbusinessShiftingof unitwasdonewiththepermissionofGovernmententitledtoexemption. Assessee company was engaged in software development from its unit located at Gujarat. It commenceditsbusinessintheyear1989.Itwasentitledtobenefitofsection10Bforaperiodof10 years. During 199293 it shifted its unit to Bangalore and claimed deduction under section 10B. AssessingOfficerheldthattheshiftingofunitwillamounttoreconstructionofbusiness,hence,not entitled to exemption under section 10B. High Court held that, when the shifting had been done withpermissionofGovernmentandaftershifting,therewasonlyoneundertakingwhoseidentity, integrity and continuity was maintained, therefore the assessee was entitled to claim exemption undersection10B.(A.Y.199293). CITv.SaskenCommunicationsTech.Ltd.(2012)204Taxman84(Karn.)(HighCourt) S.10B:Exempt incomes Export oriented undertaking Extended period of deduction Amendedprovisionscameintoforceon1stApril,1999Assesseeisentitledforextendedtax holidayunderamendedprovision. Assesseecommenceditsproductioninthe100percentEOUintheyear199394andclaimedthe exemptionforfiveyearsfrom199394to199798.Amendedprovisioncameintoforceon1stApril 1999,underwhichtheassesseewasentitledtoclaimthebenefitoftaxholidaysfor10yearsand accordinglytheassesseeclaimeddeductionfor19992000,200001and200102.AssessingOfficer denied the deduction for the period 200102. The High Court held that where the assessee the entitled to the tax holiday under the amended provision for further period of five years i.e. from 199394to200203asperamendmentofsection10Bw.e.f.1stApril,1999extendingthebenefitto 10Years.(A.Y.200102) CITv.DSLSoftwareLtd.(2012)66DTR97/246CTR542(Karn.)(HighCourt) 10 http://www.itatonline.org

 S. 10B: Exempt incomes Export oriented undertaking Splitting up Reconstruction SeparateundertakingforproductionofsimilargoodsEntitledforexemption. AssessesearlierundertakingwhichstartedintheAssessmentyear199495,stoppeditssaleswith effectfromtheassessmentyears199899onwards.Newundertakingwassetupintheassessment year200203.TheTribunalheldthatprovisionsofsection10Bdonotplaceanybarontheassessee having a separate new undertaking for manufacture and production of same or similar goods as doneearlier.DevelopmentCommissionerdidnottakeanyobjection.Processcarriedonbyassessee toproducequilts,bedsheets,bedspreadsandbedcoversetc.arecommoditiesdifferentfromthe newrawclothorconsumablesoutofwhichtheyaremanufactured.(A.Y.200203&200304) TaurusMerchandising(P)Ltd.v.ITO(2012)143TTJ1/65DTR48(Delhi)(Trib.) S.10B: Exempt incomesExport oriented undertaking Allocation of expensesCharity MiscellaneousexpensesshouldbeexcludedManagementsalaryexpensesistobeallocated intheratioofsalesturnover. Charityandmiscellaneousexpensesshouldbeexcludedfromallocationofexpensespertainingto exportorientedunit.Asregardsthemanagementsalary,theallocationshouldbemadeintheratio of sales turnover as adopted by the assessee itself to allocate other expenses. This method of allocationwasmoreaccurateandcorrecttofactsofthecase.Thebasisadoptedbytheassesseeof time estimated in proportion to the production capacity employed in export oriented units and nonexportorientedplantswasunreliableandunscientific.(A.Ys.200405,200506,200607) Dy.CITv.CosmoFilmsLtd.(2012)13ITR340(Delhi)(Trib.) S. 10BA: Exempt incomesExport of articles or things DEPB as profit derived from export businessiseligibleforexemption. DEPB as a profit derived from export business for the purpose of computing deduction under section10BA.RevenueconcededtheissuebeforetheHighCourt.(A.Y200506) CITv.Arts&CraftsExports(2012)66DTR85/246CTR463(Bom.)(HighCourt) Editorial:Arts&CraftsExportsv.ITO(2012)66DTR69(Mum.)(Trib.) S.12AA:ExemptionCharitablepurposeAstheactivitiesofthetrustbeinggenuinethetrust isentitledforregistration. Forgrantingregistrationtheobjectofthetrustmustbecharitableandactivitiesmustbegenuine. OnthefactsoftheassesseeboththeconditionsweresatisfiedandTribunalwasjustifiedinholding thatthetrustwasentitledforregistration.(A.Y.200304) CITv.LucknowEducationalandSocialWelfareSociety(2012)340ITR86(All)(HighCourt)(Lucknow) S.17(2): Salaries Perquisites Tax paid by employer is perquisite Accommodation IncometaxRules1962Rule3. Tax paid by employer on behalf of employee is perquisite under section 17(2) and therefore not includible in salary under Rule 3 of Incometax Rules 1962, for purpose of computing perquisite valueofaccommodationsuppliedbyemployertoemployee.(A.Y.200607) IsacoSakaiv.Jt.CIT(2012)49SOT154(Delhi)(Trib.) S.22:IncomefromhousepropertyDeemedownerLegalownerIrrevocablepermanentleave and licence to tenantsTenants will be owner and Income from house property will be assessableintheirhands.[S.27,269UA(f)] 11 http://www.itatonline.org

 Assessee company is engaged in the business of real estate development. It entered into an agreementwithaTrustwhereintheassesseewasgivenpermissiontodemolishexistingstructure which was existing occupied by tenants and construct a new building. After settling old tenants, assesseewithregardstonewpersonsassignedtenancyrightsbyacceptingsubstantialamountas deposit and entered on to irrevocable permanent leave and licence agreement. Assessing Officer heldthatassesseewasownerofpropertyandassessedincomefromhousepropertyinassessees hand.Tribunalobservedthatfromtheagreementwithnewpersons,itcouldbeseenthatassessee hadgivenpossessiontooccupantbutalsoabsoluterighttotransferorassignmentbutalsorightto subletorgrantleaveandlicenceofsaidpremises.Consideringvariousotherclausesofagreement the Tribunal held that since the assessee had given irrevocable permanent leave and licence to tenantsandvirtueofsection27,readwithclause(f)tosection269UA,tenantswouldhavebecame deemed owners of premises income from house property would be taxable in their hands.(A.Y. 200203to200506) PriyadarshiniProperties&Estates(P)Ltd.v.ITO(2012)134ITD290(Mum.)(Trib.) S.28(va):BusinessincomeCapitalorrevenuereceiptNoncompetefeeRelinquishment ofrighttomanufactureCapitalreceiptLawbeforeApril1,2003Asst.yearspriorto2003 04.[S.55(2)(a)] InA.Y.200001,theassesseereceivedRs.11crorespursuanttoanoncompeteagreementwhich wasfor5years.TheAssessingOfficerheldthattherewasatransferbywayofrelinquishmentof theassesseesrighttomanufactureandthatthesamewaschargeabletocapitalgainsbytaking Nilcostundersection55(2)(a).ThiswasreversedbytheCIT(A)onthegroundthatthepersonal skillsoftheassesseewereplacedunderrestraintandasthesaidpersonalskillswerenotacapital asset,capitalgainswasnotchargeable.OnappealtotheTribunal,thematterwasreferredtothe SpecialbenchitwasheldbytheSpecialBench: (i)Thetaxabilityofanoncompetefeedependsonthepurposeforwhichitispaid.Anoncompete feecanbedividedintotwocategories:(a)considerationreceivedbythetransferorofabusinessfor agreeingnottocarryonthesamebusiness;(b)considerationreceivedbyotherpersonsassociated withthetransferortoensurethattheydonotindulgeincompetingbusiness.ForA.Y.200304 & onwards,noncompetefeereceivedbythetransferorofabusinessistaxableasacapitalgainsin viewofsection55(2)(a)whichprovidesthatthecostofarighttocarryonbusinessshallbeNil. Though section 55(2)(a) as amended by the FA 1997 w.e.f. 1.4.1998 referred to a right to manufacture, produce or process any article or thing, that would not cover a noncompete covenant.ForA.Y.200304&onwards,anoncompetefeereceivedbyapersonassociatedwiththe transferor is taxable as business profits under section 28(va)(a) as being a payment for not carryingoutanyactivityinrelationtoanybusiness.Anoncompetefeereceivedinanearlieryear isnotchargeabletotaxinviewofGufficChem.P.Ltd.v.CIT(2011)322ITR602(SC); (ii) On facts, the consideration of Rs. 11 crores received by the assessee was not for sale of any business nor was it for not carrying on any business which he was carrying on, which he had transferred.Itwasalsonotapaymentforarighttomanufacture,produceorprocessanyarticleor thing. The sum was not paid for transfer of any intangible right in respect of manufacture, productionorprocessofcement.Accordingly,thecapitalgainsprovisionswerenotattracted.The amountwaspaidfornotcarryingoutanyactivityinrelationtoanybusinessandwouldfallwithin the ambit of section 28(va)(a). However, as section 28(va) came into effect in A. Y. 200304, the receiptswasnotchargeabletotaxinA.Y.200001.(A.Y.200001) ACITv.B.V.Raju(Dr.)(Hyd.)(SB)(Trib.)www.itatonline.org 12 http://www.itatonline.org

 S.28(i):BusinessincomeCapitalgainsPurchaseandsalessharesFrequencyMagnitude VolumeAssessableasbusinessincomeCapitalasset.(S.2(14),45,111A) Assessee filed the return of income showing the income from sale of shares as capital gains. The Tribunal held that the voluminous share transactions were in the ordinary line of the appellants business, purchase and sale of shares was not for the purpose of earning dividend but with the dominant intention of resale in order to earn profits; the profit made by them is not of mere enhancementofvalueoftheshares,butisaprofitmadeinthecarryingonofabusinessschemeof profitmaking;hugevolumeofsharestransactions,therepetitionandcontinuityofthetransactions, givethemaflavouroftrade;themagnitude,frequencyandratioofsalestopurchasesonthetotal holdingsisevidencethattheassesseehadnotpurchasedwiththeintentiontotradeinsuchscripts. TheHighCourtconfirmedtheorderofTribunalwhichheldthatprofitonsaleofsharesasbusiness income.(A.Ys.200506,200607). P.V.S.Rajuv.Addl.CIT(2012)340ITR75(AP)(HighCourt) P.Rajyalakshmiv.Addl.CIT(2012)340ITR75(AP)(HighCourt) S. 28(i):Business income Capital gains Longterm and shortterm gains from PMS transactionstaxableasbusinessprofits.[S.10(38),28(i)] The assessee offered LTCG & STCG on sale of shares which had arisen through a Portfolio Management Scheme of Kotak and Reliance. The investments were shown under the head investments in the accounts and were made out of surplus funds. Delivery of the shares was taken. The Assessing Officer &CIT(A) held that as the transactions by the PMS manager were frequentandtheholdingperiodwasshort,theLTCG&STCGwereassessableasbusinessprofits. Onappealbytheassessee,helddismissingtheappeal: (a) InaPortfolioManagementScheme,thechoiceofsecuritiesanditsperiodofholdingisleft to the portfolio manager and the assessee has no control. Only the portfolio manager can deal with the Demat account of the assessee. (b) It is at the end of the year the sharesavailableintheDEMATaccountcanbeentered.Therefore,atthetimeofdeposit ofamount,theintentionoftheassesseewastomaximizetheprofit.(c)Asthepurchase andsaleofsharesunderPMSisnotinthecontroloftheassesseeatall,itcannotbesaid that the assessee had invested money under PMS with intention to hold shares as investment.(d) The portfolio manager carried out trading in shares on behalf of his clientstomaximizetheprofits.Therefore,itcannotbesaidthatshareswereheldbythe assessee as investment. (e ).There is, however, a difference between investment in a mutualfundandPMS. RadialsInternationalv.ACIT(Delhi)(Trib.)www.itatonline.org Editorial: Refer, ARA Trading & Investment Pvt. Ltd. (2011) 47 SOT 172 (Pune)(Trib.), ITO v.RadhaBirju Patel ITA NO 5382/M/2009 Bench D DT 30 30 th November 2010(Mum.)(Trib.)www.iatonline.org,NaliniNavinBhagwati(Mrs)v.ITOITANo53/M/2010Bench BAsstyear200607dt582011(Mum)(Trib)__(Unreported) S. 28(i):Business income Capital gains Investment in shares Assessee had intention to tradethereforeassessableasbusinessincome.(S.45) AssessingOfficertreatedthesharetransactionasbusinessincome.OnappealtheTribunalupheld the assessment as business income by considering the following factors (1) Company has passed the resolution to open account with depository participant for trading in shares of various companiesunderDEMATsegment.(2)Companybyitsresolutionauthoriseditsthreedirectorsto 13 http://www.itatonline.org

 deal in purchase and sale and securities to tune of Rs. 100.00 crore. (3) Assessee had appointed asset management company as its portfolio manager to provide portfolio management and other relatedservices.Onthefacts,itwasapparentthatassesseecompanyhadintentiontodotradingin shareswithaprofitmotiveandthus,incomearisingfromsharetransactionswasrightlybroughtto taxasbusinessincome.(A.Y.200607) MafatlalFabrics(P)Ltd.v.Dy.CIT(2012)49SOT303(Mum.)(Trib.) S.28(i):BusinessincomeExportDEPBcreditNotassessableasincometillitissold. Intheprofitandlossaccounttheassesseehasshowntheexportbenefitwasreceivable(DEPB).In schedule9tothebalancesheet,DEPBcreditwasshownundertheheadOtherincome.TheDEPB creditwasnotsoldduringtheyear.TheTribunalheldthatDEPBcreditnotsoldduringtherelevant yearcannotbeassessableasincome.(A.Y.200708) ITOv.BinayakHiTechEngineeringLtd.(2012)13ITR369(Kol.)(Trib.) S. 28(i): Business loss Foreign exchangeForeign currency assets Loss is assessable as businessloss. Theassesseeconvertedtheforeigncurrencyassetsandliabilitiesintorupeetermsattheexchange rate prevalent at the last date of financial year i.e.the date on which the balance sheet of the assessee was drawn and this was reflected in the profit and loss account regularly from year to year.Inthecurrentyearitwaslosswhileintheimmediateprecedingyeartherewasgain.Theloss isallowableasbusinessloss.(A.Ys.200405,200506,200607) Dy.CITv.CosmoFilmsLtd.(2012)13ITR340(Delhi)(Trib.) S. 32: Depreciation Computer Accessories is integral part of computer system and is entitledtodepreciationat60%. Computer accessories are integral part of computer system and depreciation against these are liabletobeallowedat60percent.(A.Ys.200405,200506,200607) Dy.CITv.CosmoFilmsLtd.(2012)13ITR340(Delhi)(Trib.) S. 32: Depreciation Commercial rightSimilar nature Scheme of Corporatisation and DemutualizationRighttoconductbusinessacquiredhencedepreciationisnotallowable. Assessee company purchased a membership card in cash segment and derivative segment from Bombay stock exchange. i.e. BSE for a total consideration of Rs. 2.50 crores and claimed depreciationonsamewhichwasallowed.Subsequently,BSEunderschemeofCorporatisationand Demutualisation was succeeded by a company incorporated under Companies Act, 1956, under the name and style Bombay Stock Exchange Ltd.. Assessee, consequent to demutualization had acquired two separate rights in new Company i.e. (i) ownership rights and (ii) trading rights. Ownership rights were given by issuing 10000 shares of BSEL in the name of assessee, whereas, trading rights were subject to deposit of certain amount by assessee with BSEL.In the course of originalassessmentproceedingstheAssessingofficerheldthatnopartoforiginalcostofBSEcard could be attributable to right to conduct trading and hence, assessee would not be entitled claim depreciation.Sinceownershiprightgaveassesseearighttoparticipateinownershipofassetsand management of BSEL, it was not a business and commercial right of similar nature under section 32(1)(ii) and thus assessee could not be allowed depreciation in respect of said right. As regards tradingright,eventhoughsaidrightwasacommercialright,yetinfactthatvalueofsaidrightwas 14 http://www.itatonline.org

 equal to refundable deposit to be made by assessee with BSEL, it could be depreciated when its value in reality did not come down. The Tribunal confirmed the view of Assessing Officer.(A.Y. 200607) SinoSecurities(P)Ltd.v.ITO(2012)134ITD321(Mum.)(Trib.) S. 35D: Business expenditure Amortisation of preliminary expenses Expenditure on preference shares. Disallowance was confirmed as extension of industrial undertaking couldnotbecompletedduringtherelevantyear. The assessee issued nonconvertible cumulative preference shares of Rs. 150 crores. Assessee claimed the entire issue expenditure as revenue. The assessing officer held that the said expenditurewascapitalinnature.OnappealTribunalheldthatthepurchaseofarigmightresultin extension of its Industrial undertaking. But the deduction under section 35D of the Act would be allowfortensuccessiveyearsbeginningwiththeyearinwhichextensionofindustrialundertaking was complete. It was found that the rig was under refurbishment and was not put to use and assesseehadshownthisaspartofworkinprogress.Noarticleclassifiedasworkinprogresscould be considered as a completed item. As the extension of industrial undertaking could not be considered as complete during relevant assessment year, claim under section 35D cannot be allowed.(A.Y.200506,200607) Dy.CITv.AbanOffshoreLtd.(2012)13ITR180(Chennai)(Trib.) S.36(1)(iii):BusinessexpenditureInterestonborrowedcapitalIndianventureisallowable asbusinessexpenditure. Assessee borrowed money for working capital loan and paid interest on said loans Assessee also advancedtheamount forplacing theinterestfreesecuritydepositfortheaccommodation ofMIL regional business head. Assessing Officer disallowed the proportionate interest in respect of amount kept as security deposit. The Tribunal held that as a group holding company of Indian ventures,itprovidescertainsupport/stewardservicestovariousdownstreamventuresinIndia. Mr.SwassouthAsiaheadoftheMILgroup.Itisthusclearthatinterestfreeadvanceinquestion was owing to commercial and business expediency. The disallowance of interest was not justified.(A.Y.200304&200405) Dy.CITv.MonsantoHoldings(P)Ltd.(2012)134ITD189(Mum.)(Trib.) S. 36(1)(vii) : Business expenditureBad debts Money lending business allowable as bad debts. Assesseehasadvancedthemoneyinthecourseofmoneylendingbusiness,thereforetheclaimof baddebtwasallowableundersection36(1)(vii)readwithsecondlimbofsection36(2).(A.Y.2000 01) AllGrowFinance&Investment(P)Ltd.v.CIT(2012)66DTR131(Delhi)(HighCourt) S. 36(1)(vii): Business expenditure Bad debtsBusiness lossMoney lending is one of the ancillaryobjectshencethelosswasnotallowable.[S.28(1),37(1)] Moneylendingisoneoftheancillaryobjectsofassesseecompany,astheloanadvancedwasnotin the course of money lending, the loss is neither deductible as bad debts nor business expenditure.(A.Y.200102and200405) MainiShippingP.Ltdv.ACIT(2012)13ITR440(Mum.)(Trib.) 15 http://www.itatonline.org

 S. 36(1)(viii): Business expenditure Financial corporation Dividend Interest on short termdepositServicechargesonSDFloansisnotincomederivedfrombusinessofproviding longtermfinance. Assesseeclaimeddeductionundersection36(1)(viii),inrespectoffollowingitemsofincome(a) Dividend received in respect of redeemable preference share in companies (b) Interest on short depositswithbanks(c)ServicechargesonSDFloans.Assessingopinedthatthesewereincomenot derivedfrombusinessofprovidinglongtermfinance.TribunalandHighCourtupheldtheviewof AssessingOfficer.(A.Ys.19992000to200708) National Cooperative Development Corporation v. ACIT (2012) 204 Taxman 6/ 65 DTR 295 (Delhi)(HighCourt). S.37(1):BusinessexpenditureCapitalorrevenueRemovalofencroachmentsisallowable asrevenueexpenditure. Expendituretowardsremovalofencroachmentsinandaroundtechnicalareaofairportforsafety andsecurityismerelyforpurposeofremovalofdisabilityhenceallowableasrevenueexpenditure. (A.Y.199899) Airports Authority of India v. CIT (2012) 340 ITR 407/247 CTR 149/66 DTR 440 (Delhi)(FB)(High Court) S.37(1):Business expenditureCapital or revenuePurchase of Software application ImprovementofleasedpremisesBothallowableasrevenueexpenditure. Expenditure incurred on purchase of software application is allowable as revenue expenditure. Expenditureincurredonimprovementsofleaseholdpremisesviz.expensesofflooring,partition, wiring, false ceiling, roofing, airconditioning unit and duct, electric wiring laying network for setting up computers and on purchase of furniture on improvement of leasehold premises allowableasrevenueexpenditure.(A.Ys.200102,200203) CITv.AmwayIndiaEnterprises(2012)65DTR313(Delhi)(HighCourt) S. 37(1): Business expenditure Capital or revenue Suspension of one manufacturing activitiesSeverancecostofemployeesisallowableasbusinessexpenditure. The assessee company had started manufacturing of powdered soft drink. During the accounting yearrelevanttotheassessmentyear200304,itdecidedtostopitsmanufacturingactivityasitwas found to be nonprofitable. Many of employees who were directly in the manufacturing activity were laid off and the severance cost to those employees were paid. Assessee continued to do the tradingactivity.TheCourtheldthatsuspensionofoneoftheactivitiesdidnotamounttocloserof business,hencetheexpenditurewasallowable.(A.Y.200304) CITv.KjsIndiaP.Ltd.(2012)340ITR380(Delhi)(HighCourt) S.37(1):Business expenditureCapital or revenueMembership of clubISO certificate.Both allowableasrevenueexpenditure. Expenditure incurred for acquiring membership of clubs is revenue expenditure. ISO certificate would only certify the quality which is already maintained by the assessee in the manufacturing processanddoesnotconferanybenefitofenduringcredibility,hencetheexpenditureisrevenuein nature.(A.Y.199495to199697) CITv.InfosysTechnologiesLtd.(2012)65DTR347(Karn.)(HighCourt) 16 http://www.itatonline.org

 S.37(1):Business expenditureContribution to traffic police Not allowableRepairs and renovationofleaseholdpremisesisallowableasrevenueexpenditure. The contribution made to traffic police can at the most considered as donation and cannot be consideredaswhollyandexclusivelyincurredforthepurposeofbusiness.Expenditureincurredon repairsandrenovationoftheleaseholdpremisesanddoneinconnectionwiththebusinessofthe assessee to improve the ambience of the office was revenue in nature and allowable as business expenditure.(A.Y.199394to199697) CITv.InfosysTechnologiesLtd.(2012)65DTR353/246CTR371(Karn.)(HighCourt) S.37(1):BusinessexpenditureCapitalorrevenueExpenditureincurredondevelopmentof newproductinsamelineofbusinessisallowableasrevenueexpenditure.(S.35D) Theassesseeengagedinmanufacturingofpermanentmagnets,initsbooksshowedunderthehead MiscellaneousexpenditureasumofRs.27,05,401/beingpreproductionexpensesinrelationto bondedpermanentmagnetandclaimedthesaidexpenditureasrevenueexpenditureinthereturn ofincome.TheAssessingOfficerdisallowedthesaidexpenditureonthegroundthattheassessee had shown the expenditure as Pre production expenses and having capitalized in the books of account, the said expenditure to be amortised under section 35D. Commissioner (Appeals) and Tribunalheldthat,expenditurefordevelopmentofnewproductinsamelineofbusinessisrevenue expenditure.(A.Y.200405) Dy.CITv.MagneticMeterSystemsIndiaLtd.(2012)13ITR43(Chennai)(Trib.) S. 37(1): Business expenditure Travelling expenses Employee Foreign citizens to be consideredforcomputingdisallowanceunderRule6D. The Assessing Officer, calculated the disallowance under Rule 6D of the Incometax Rules, 1962, withreferencetoeachtripoftheindividualemployeeandafterconsideringotherrelatedexpenses. Commissioner(Appeals)agreedwiththeassesseethatotherrelatedexpensesliketelephone,local conveyancecouldnotbeconsideredforthepurposeofRule6D.However,computationinrespectof eachtripwasupheld.TribunalconfirmedtheviewofCommissioner(Appeals).Tribunalheldthat even in respect of travelling expenses of foreign citizens to be considered for computing disallowanceunderrule6D.(A.Y.199596) AdityaBirlaNuvoLtd.v.ACIT(2012)13ITR128(Mum.)(Trib.) S.37(1):BusinessexpenditureCapitalorrevenueConstructionofaccessroadtonewplant iscapitalinnature. TheTribunalheldthattheapproachroadwasconnectedtotheadditionalprofitearningapparatus being built by the assessee at the new unit of the expansion programme, therefore expenditure incurredontheapproachroadwasinconnectionwithaugmentationtotheexistingprofitearning apparatusofthecompanyandhencetheexpenditurewouldbecapitalinnature.(A.Y.199596) AdityaBirlaNuvoLtd.v.ACIT(2012)13ITR128(Mum.)(Trib.) S.37(1): Business expenditure Firm Insurance premium on key man insurance policy of partnerisallowable.[S.10(10D)] Theassesseeefirmtookakeymaninsurancepolicyinrespectofapartner,paidinsurancepolicy premiumonthepolicyandclaimeditasexpenditure.TheAssessingOfficerheldthat thepartner wasnotaseparateandindependentpersonfromthefirmand,therefore,thepaymentofkeyman insurancepremiuminrespectofthe policytakenonthelife ofpartner amountedto claimingthe deductionforselfandnotallowable.TheTribunalconfirmedtheorderofCommissioner(Appeals) 17 http://www.itatonline.org

 whoheldthatinsurancepremiumonkeymaninsurancepolicytoinsurelifeofpartnerisallowable. (A.Y.200708) ACITv.ParamountImpex(2012)13ITR374(Chandigarh)(Trib.) S. 37(1): Business expenditure Advertisement expenditureAdhoc disallowance is not justified. The Assessing Officer cannot disallow the expenditure on adhoc basis merely because the advertiseexpenditurehasincreasedby200%,asneitherpointingoutanydefectsinthebooksof accountnorrejectedthebooksofaccount.(A.Y.200798) WidexIndia(P)Ltdv.Dy.CIT(2012)66DTR57(Delhi)(Trib.) S.40(a)(i): Amounts not deductible Business expenditure Commission Nonresident AgentBusinessconnectionTaxisnotdeductableatsource.(S.195) AssesseehaspaidsalescommissiontoitsholdingcompanyEonTechnologyUK.TheCourtheldthat, when a nonresident agents operates outside the country, no part of income arises in India and sincepaymentisremitteddirectlyabroadandmerelybecauseanentryinthebooksofaccountis made in India, it does not mean that nonresident has received any payment in India, therefore, assesseeisnotliabletodeducttaxatsourcehence,nodisallowancecanbemadebyapplyingthe provisionofsection40(a)(i)(A.Y.200708). CITv.EonTechnology(P)Ltd.(2012)246CTR40(Delhi)(HighCourt) S. 40(a)(ia):Amounts not deductible Deduction at sourceReimbursement of expenses Clearingandforwardingagent.Disallowancecannotbemade(S.172,194C,195) Reimbursementofpaymenttowardsseafreighttransport,CCIcharges,steamfreightchargesand REPOcontainerchargesmadebytheassesseetoC&Fagentswhohavealreadymadethepayment onbehalfoftheassesseeiscoveredundersection172andnotbysection194Cor195andtheagent having already deducted TDS from the transportation charges and shipping bill before making these payments to the principal which have been reimbursed by the assessee, assessee was not liabletodeducttaxatsourcefromsuchpaymentsandconsequently,samecouldnotbedisallowed byinvokingtheprovisionsofsection40(a)(ia).(A.Y.200506) ACITv.MinproIndustries(2012)65DTR113/143TTJ331(Jd.)(Trib.) S. 40(a)(ia): Amounts not deductibleDeduction at source VSAT and transaction charges Evenifpayeehaspaidtax,payernoteligiblefordeduction. For A. Ys. 200708 & 0809, the assessee paid VSAT & transaction charges without deduction of TDS. The Assessing Officer held the payment to be fees for technical services & disallowed the paymentundersection40(a)(ia)forwantofTDSundersection194JthoughtheCIT(A)allowedthe claimbyrelyingonSkycellCommunicationsLtd.andanotherv.Dy.CIT(2001)251ITR53(Mad.). BeforetheTribunal,theassesseearguedthatthoughthemeritswerecoveredagainstitbyCITv. Kotak Securities Ltd. (2012) 340 ITR 333 (Bom.), the deduction had to be allowed because (i) section 40(a)(ia) was not a taxlevying provision but was merely to ensure that tax was paid by eitherthepayerorthepayee.Asthepayeehadalreadypaidthetaxes,thebarinsection40(a)(ia) didnotapplyinlinewithHindustanCocaColaBeverageLtd.v.CIT(2007)293ITR226(SC)and(ii) in accordance with Kotak Securities, as the department had not objected to the nondeduction of TDSontransactionchargesinthepast,therewasnojustificationforinvocationofsection40(a)(ia). HeldbytheTribunal: Theargumentthatsincethepayeehasalreadypaidduetaxontheincome,section40(a)(ia)cannot beinvokedisnotcorrect.ThelawinHindustanCocaColaBeverageLtdv.CIT(2007)293ITR226 18 http://www.itatonline.org

 (SC)thatifthepayeeisassessed,thetaxcannotberecoveredfromthepayerwasinthecontextof section 201 and pursuant to Circular No.275/201/95IT dated 2911997. In the absence of such circularincaseofdisallowanceundersection40(a)(ia),theprinciplelaiddowncannotbeadopted fors.40(a)(ia).Asregardstheprinciplethatthedepartmenthadacceptedthepositioninthepast, thedefenseisavailableforA.Y.200708butnotforA.Y.200809. ACITv.DICGCLtd.(Mum.)(Trib.)www.itatonline.org S. 40A(3): Expenses or payments not deductible Cash payments Airports Authority PaymentstoagentDisallowancecannotbemade.[IncometaxRules,1962,Rule6DD(k)] Payments to Airports Authority of India in accordance with directions of Authority, falls under exceptionsspecifiedinRule6DD(k)hencedisallowancewasnotjustified.(A.Ys.200506to2007 08) SRCAviationP.Ltd.v.Dy.CIT(2012)13ITR600(Delhi)(Trib.) S. 40A(3): Expenses or payments not deductible Cash payments Advance for purchase of landDisallowancecannotbemade.. Advancemadetopurchaseoflandwasreceivedbackbyassesseeasthedealcouldnotmaterialize, paymentmadeforpurchaseoflandcannotbedisallowedundersection40(A)(3).(A.Y.200607) YamunaPrasadPeshwav.Dy.CIT(2012)65DTR330/143TTJ615(Jd.)(Trib.) S. 40A(3): Expenses or payments not deductible Cash payments Purchase of land No BankingfacilitiesDisallowancecannotbemade.[Rule6DD(e)(g)(j)&(k)] The cash payments made purchase of land to farmers residing in a villages, where there is no bankingfacilitiesandmadecashpaymentsafterbankinghoursasindicatedbythetimeofpayment mentionedinthecashvouchers,therewasanexceptionalcircumstancesformakingcashpayments whichfallundertheexceptionclauseinrule6DDandtherefore,theimpugnedpaymentscouldnot bedisallowedundersection40A(3).(A.Ys.200607and200708) ShreeSalasarOverseas(P)Ltd.v.Dy.CIT(2012)66DTR9(Jp.)(Trib.) S. 41(1): Profits chargeable to tax Income AccrualRemission or cessation of trading liabilityWaiverofloanSection41(1)isnotattracted. Fortheapplicationofsection41(1),theconditionprecedentisthatthereshouldbeanallowanceor deductionintheassessmentforanyyearinrespectofloss,expenditureortradingliabilityincurred byassesseehencethesection41(1)isnotattractedtowaiverofloanliabilitysincenoallowanceor deductionwasclaimedinrespectofthesame.(A.Y.200304) CITv.CompaqElectricLtd.(2012)66DTR38(Karn.)(HighCourt) S. 41(1): Profits chargeable to tax IncomeRemission or cessation of trading liability Refundofvalueaddedtaxcannotbeassessedundersection41(1).. Afterrefundisclaimedbytheassesseeintheprescribedform,theCommercialtaxauthorityhasto acceptorrejecttheclaim.Valueaddedtaxrefundisnotanautomaticrefund,itisdependedonthe decision of the commercial tax authority who has to adjudicate the claim. It is not a benefit that accrued to the assessee during the year as the claim was not adjudicated by the commercial tax authority.(A.Y.200708) ITOv.BinayakHiTechEngineeringLtd.(2012)13ITR369(Kol.)(Trib.) 19 http://www.itatonline.org

 S. 41(1): Profits chargeable to tax Income Accrual Remission or cessation of trading liability Conditional consent decree passed by Debt recovery Tribunal income can not be taxedduringtheyear. FortheA.Y.20001,theAssessingOfficermadeadditionofincomeundersection41(1),beingthe loanwrittenoffbySyndicateBankinpursuanceofanorderpassedbytheDebtRecoveryTribunal. TheTribunalheldthatitwasclearfromtheorderpassedbytheDebtRecoveryTribunalthatonly onfulfillingcertainconditionswhichwerespreadoveraperiodoftime,theassesseewouldderive thebenefit.Thepaymentstobemadebytheassesseeoveraperiodofthreeyears.TheBankgave theNoduescertificateonlyinOctober,2003.Hence,incomeifanyfromtheconsentdecreecould notbeboughttotaxintheassessmentyear200001astheassesseehadnotobtainedanybenefit duringtheyear,eitherbywayofanyliabilityinthatyear.(A.Y.200102and200405) MainiShippingP.Ltd.v.ACIT(2012)13ITR440(Mum.)(Trib.) S. 43(5):Speculative transaction Derivatives Futures and options Business loss Transactionbefore25thJan.,2006Netincomeaftersettingofflosscanonlybeassessedas businessloss.[S.28(i)] AssesseehasofferedasumofRs.3,27,687/arisingoutofF&OtransactionsundertheheadShort term capital gains. Assessing Officer held that as per provisions of section 43(5)(d) profits from transactioninF&OwasassessableundertheheadBusinessandnotCapitalgains.Asregardsthe lossamountingtoRs.1,35,889/wasallowedtobecarriedforwardasspeculationloss.Onappeal theCommissioner(Appeals)confirmedtheorderofAssessingOfficer.OnappealtheTribunalheld thatinsertionofclause(d)insection43(5)isapplicablefromA.Y.200607andevenlossincurred before 25th Jan., 2006 should also be reckoned as only business loss. The Tribunal directed the Assessing Officer to assessee net profit from F&O at Rs. 3,27,687/ under the head business.(A.Y. 200607) PradeepKumarHarlakav.ACIT(2012)65DTR157/143TTJ446(Mum.)(Trib.) S.45:CapitalgainsTransferIssueofsalecertificateLumpsumpaidtowardsinterestSale of property by public action Income from other sources Assessable as capital gains after salecertificateissuedbycompetentauthority.(S.2(28A),2,47(v),56) Theamountreceivedbytheofficialliquidatorintermsofordersofcompanycourt,thoughreferred toasinterest,forthepurposeofassessmentofincometaxitwaspartofthesaleconsiderationand therefore, could not be treated as income from other sources under section 56, the amount is assessableascapitalgainsundersection45.Possessionofthemillwastransferredtothepurchaser bywayofleaseandnotintermsoftheTransferofPropertyAct.Therefore,therewasneitheractual transfernorartificialtransferoftitleonaccountofthetransferofpossession.Suchtransferoftitle tookplaceonlyonpaymentoftheentireamountbythepurchaserandonlyafterthesalecertificate wasissuedbythecompetentcourt.(A.Y.199596) CauverySpinningandWeavingMillsLtd.(Inliquidation)v.Dy.CIT(2012)340ITR550(Mad.)(High Court) S. 45: Capital gains Business income Investment in sharesRule of consistencyProfit on saleofsharesisassessableascapitalgains[S.28(i)] Assessee is buying and selling shares in a large scale at high frequency and the period of holding wasalsonotverylong.AssessingOfficertaxedtheincomeasbusinessincome.TheTribunalheld 20 http://www.itatonline.org

 thatoncetheAssessingOfficerhasacceptedthetransactionofsharesasinvestmentinearlieryear and also in subsequent year, in the absence of any glaring material change in facts and circumstances,AssessingOfficeroughttohavemaintainedconsistentviewonissue.TheTribunal heldthatincomearisingfrompurchaseandsaleofsharesheldasinvestmentwouldbeassessable ascapitalgainandnotasbusinessincome.(A.Ys.200506and200607) SunilKumarGaneriwalv.Dy.CIT(2012)134ITD179(Mum.)(Trib.) S. 45: Capital gains Business income Investment in shares Rule of consistency is to be followedandassessableascapitalgains.[S.28(i)] Following the rule of consistency the Tribunal held that the profit on sale of shares has to be assessedasshorttermcapitalgainsandnotasbusinessincome.(A.Y.200506) S.K.Financev.Dy.CIT(2012)13ITR236(Mum.)(Trib.) S. 45: Capital gains Business income Investment in sharesRule of consistencyProfit on saleofsharesisassessableascapitalgains.[S.28(i)] Theassesseehadconsistentlyshowninpastseveralyearsthesharetradingincomeascapitalgains, eithershorttermorlongtermorbothandthathadnotbeenchallengedbytheDepartment.There was no material on record to hold that the assessee had deviated from the accepted nature of transactionoradoptedadifferentmethodofsharetransactionmoreakintobusinesstransaction. Asfarastheperiodofholdingofaninvestmentwasconcerned,theacceptedlegalpositionwasthat adecisionhadtobetakenbytheassesseehimselfastoreapthemaximumbenefits.Theprofiton saleofsharescannotbeassessedasbusinessincome.(A.Y.200607) ACITv.GargiShitalkumarPatel(2012)13ITR386(Ahd.)(Trib.) S. 45: Capital gainsBusiness income Investment in bonds, mutual funds and other securities Short term Profit on sale of shares is assessable as capital gains and cannot be treatedasbusinessincomePrinciplelaiddown[S.28(i)] Assesseecompanywasengagedinbusinessofdealinginautosparepartsandinvestmentinbonds, mutualfundsandothersecurities.AssessingOfficertreatedsharetransactionsasbusinessactivity andassessedasbusinessincome.TheTribunalheldthattheassesseehasnotborrowedfundsfor purchaseofshares,furthervalueofsharesatcloseofyearhadbeentakenatcostandnotmarket priceorcostwhicheverislower,whichshowedthatshareswerenottreatedasstockintrade.In earlier assessment year,purchase of shares by assessee had been treated as investment. Tribunal applied 11 principles to determine whether the sale of investment is capital gain or business income.AccordinglytheTribunaldirectedtheAssessingOfficertotreatthesaleasinvestmentas capitalgainsandnotasbusinessincome.(A.Y.200607) D&MComponentsLtd.v.ACIT(2012)49SOT224(Delhi)(Trib.) S.45:CapitalgainsBusinessincomeInvestmentinsharesSurplusisassessableascapital gains.[S.28(i)] Assesseeiscarryingonthebusinessofmarketinganddistributionofbooksandmagazines.Hehad income from purchase and sale of shares. During the year the assessee had large number of transactions of purchase and sale of shares. Assessing held the income as business income. On appeal Commissioner (Appeals) held that transactions resulted into short term capital gains and notbusinessprofits.OnappealbyrevenuetheTribunalheldthatasthedepartmenthasaccepted theassesseeasinvestorinearlieryearsandlatteryears,coupledwithfactthatbulkofprofithad arisenfromsaleofbonussharestheorderofCommissioner(Appeals)isconfirmed.(A.Y.200708) 21 http://www.itatonline.org

 ACITv.OmPrakashArora(2012)134ITD217(Delhi)(Trib.) S.45:CapitalgainsDevelopmentagreementHandingoverofpossessionBusinessincome Transfer Assessable as capital gains in the year transferee is willing to perform the obligationasperthecontractTransferofPropertyActSection53A.[S.2(47)(v),28(i)] On the facts the Tribunal found that developer had violated essential terms of agreement which tend to subvert the relationship established by the development agreement with the assessee. Therewasnoprogressinthedevelopmentagreementfortherelevantassessmentyear,eventhe municipal sanction for development was not obtained in the relevant year.Handing over the possessionofthepropertyisonlyoneoftheconditions,section53AoftheTransferofPropertyAct but it is not the sole and isolated condition and it is necessary to go in to whether or not the transferee was willing to perform its obligation under the consent terms. On the facts of the case provisions of section 2(47)(v) will not apply in the assessment year under consideration and the capitalgainswouldnotbetaxedintheassessmentyear.TheAssesseewasshowingincomefrom the land holding as agricultural income. Land which was acquired in September, 1996 was sold duringtheA.Y.200405.Therewasnoregularactivityofpurchasingandsellingofland,therefore profitonsaleofthelandwasassessableascapitalgainsandnotasbusinessincome.(A.Y.200607) K.Radhika(Mrs)&Ors.v.Dy.CIT(2012)65DTR250(Hyd.)(Trib.) S.45:CapitalgainsSaleofsharesESOPShorttermLongtermThedateonwhichoption to buy the shares is granted, could not be treated as date of acquisition of shares . Gains willbeshortterm[S.2(42A)] AssesseeisanemployeeofJohnson&JohnsonLtd.anIndiabasedsubsidiaryofJohnson&Johnson, IncUSA.Duringtheyeartheassesseereceivedtheconsiderationinrespectofsaleofstockoption shares received by him. The assessee treated the same as long term capital gain and claimed exemptionundersection54EA.AssessingOfficerheldthattheholdingperiodforthesesharetobe considered from the date of exercising the stock option to the sale of the shares, which was less thantwelvemonths,hencethegainonthesesharestobetreatedasshorttermcapitalgains.The Commissioner (Appeals) held that, the assessee has taken constructive delivery hence treated as longtermcapitalgains.TribunalreversedthefindingofCommissioner(Appeals)andheldthatthe date on which option to buy the shares is granted, could not be treated as date of acquisition of shares As per brokers statement, the assessee was not the owner of these shares before the shares were sold and entries, to that extent, were mere notional in nature, therefore impugned gainscannotbetaxedundertheheadlongtermcapitalgains.Astheshareswereheldforlessthan 12months,thegainswillbeshorttermcapitalgains.(A.Y.199899) ACITv.PramodH.Lele(2012)66DTR134(Mum.)(Trib.) S.45:CapitalgainsTransferofdevelopmentrightsTDRisimprovementoflandandifit has no cost, then, even if the land has a cost, no part of the gain on transfer of land is taxable. The assessee transferred Development Rights being the FSI and the right to load TDR on the land. While the right to construct on the land by consuming FSI was a capital asset which was acquired at a cost, the right to load TDR arose pursuant to the DC Regulations, 1991 without paymentofanycost.ThesaidrighttoloadTDRwasanimprovementtothecapitalassetheldby the assessee. If the cost of improvement of an asset is not determinable, capital gains are not chargeable. The result was that even the consideration attributable to the FSI (which had a cost) was not assessable to tax (Principle laid down in Jethalal D. Mehta v.Dy. CIT(2005)2 SOT 422 22 http://www.itatonline.org

 (Mum.)(Trib.)&MaheshwarPrakash2Coop.Hsg.SocietyLtd.(2008)24SOT366(Mum.)(Trib.)in thecontextoftransferofonlyTDRfollowed). IshverlalManmohandasKanakiav.ACIT(Mum.)(Trib.)www.itatonline.org S. 45: Capital gains Sale of shares Statement of broker Addition as undisclosed source is notjustified.(S.69) Assesseehadpurchasedthesharesmorethanoneyearbeforedateofsaleandpurchasewhichwas acceptedasgenuine,theAssessingOfficerwasnotjustifiedinmakingadditionofsaleproceedsof suchsharesasundisclosedincomeoftheassesseemerelyonthebasisofstatementofthebroker thathewasissuingaccommodationentries.(A.Y.200303) DalpatSinghChoudharyv.ACIT(2012)143TTJ500(Jd.)(Trib.) Dy.CITv.DalpatSinghChoudhary(2012)143TTJ500(Jd.)(Trib.) S.48:CapitalgainsCostofacquisitionPortfoliomanagementservicesfeeisnotdeductible. (S.45) Theexpenditureincurredinconnectionwithfeeofportfolio managementhasnothingtodowith thecostofacquisitionofsharesortransactionofshares,thereforeitisnotallowable.(A.Y.200607) PradeepKumarHarlalkav.ACIT(2012)65DTR157/143TTJ446(Mum.)(Trib.) S.48: Capital gains Computation Indexation Bond Conversion of units of UTI in to tax freebondsnoindexationisavailable. The assessee filed the return of income disclosing long term capital loss. While computing the capital loss the assessee claimed benefit of indexed cost of acquisition of UTI units. Assessing Officerinvokedthethirdprovisoofsection48asperwhichnoindexationisavailableonbondsand debentures.AccordingtotheAssessingOfficerschemeofconversionwasrequiredtobelistedon wholesaledebtsegmentofNSE,whichclearlyimpliedthatitwasadebtinstrument,wherefixed rateofinterestwasavailablewhichwasinthenatureofFD/NSC,Bondsanddebenturesandother fixedincomeinstruments.TribunalheldthatsinceunitsissuedbyUTIfellunderdefinitionofbond orderpassedbytheAssessingOfficerwasupheld.(A.Y.200506) Dy.CITv.AreezP.Khambhatta(2012)49SOT319(Ahd.)(Trib.) S.50C:CapitalgainsFullvalueofconsiderationInvestmentinresidentialhouseprovisionof section50Cisnotapplicable.(S.48,54EC,54F) During relevant assessment year, assessee sold a property and entire sale consideration was invested in Bonds in view of provisions of section 54EC. Assessing Officer by taking value determinedbyDVOundersection50C,revaluedcapitalgainandafterreducingamountinvestedin Bonds, added remaining amount in assessees income. Since the assessee has invested entire amount of sale consideration in Bonds ,provisions of section 50C are not applicable and he is entitled to deduction under section 54F.Provisions of section 50C is applicable to section 48 and section54FandnotwhereentireconsiderationinvestedinsectionBondsundersection54EC.(A.Y. 200607) PrakashKarnavatv.ITO(2012)49SOT160(Jaipur)(Trib.) S.54F:CapitalgainsCostofacquisitionAmountpaidtocontactoristobeconsideredascost ofacquisition. Amountspaidforcompletionofflatpurchasedinsemifinishedcondition,pursuanttoatripartite agreemententeredbytheassesseewiththecontractorsandthebuilderformpartof costofnew 23 http://www.itatonline.org

 houseeventhoughsuchagreementwasenteredpriortoagreementforpurchaseofhouse.Onthe facts all expenditure incurred prior to taking over possession has to be considered as part of cost.(A.Y.200607) NirupamaK.Shahv.ITO419(2012)43B.BCAJP.31(Jan2012)(Mum.)(Trib.) S.68: Cash creditsSundry creditorsOut standing in balance sheet additions can not be as cashcredits. Assessing Officer disallowed the sundry creditors holding that the assessee could not furnish complete names, addresses and PANs of all sundry creditors. The assessee contended that these creditors were petty karigars engaged in doing job work for assessee pertaining very old period and since said records had been destroyed in fire assessee was not in a position to get these outstanding creditors verified further the reading results have been accepted. Tribunal held that takingintoconsiderationallthenfactsadditioncannotbemadecashcreditsbyinvokingdeeming fictionundersection68.(A.Y.200102). Dy.CITv.DivineInternational(2012)134ITD148(Delhi)(Trib.) S. 68: Cash creditsOpening balance Loan confirmation filed addition can not be made as cashcredits. Assesseehastakenloanfromvariousparties.Assesseefiledtheconformationletters,allloanswere by account payee cheques and the lenders were employed abroad. The Tribunal held that the assessee has discharged the burden hence addition cannot be made under section 68. As regards loantakeninearlieryearadditioncannotbemadefortherelevantyear.(A.Y.200607) ITOv.NasirKhanJ.Mahadik(2012)134ITD166(Mum.)(Trib.) S.68: Cash credits Capital contribution by partners Addition cannot be made in the assessmentoffirm. Assessee firm received Rs. 7.15 lakhs as fresh capital contributions from its four partners and furnished copies of capital account of partners, their individual cash books, pass books and statement, their balance sheets computation of income and income tax returns. Assessing Officer treatedthesaidamountasunexplainedcashcreditsonthegroundthattheassesseedidnotfurnish sourceofcashcreditincashbookofpartners.TheTribunal heldtheassesseehasdischargedthe initialonuslaiduponitbyfilingvariousdocuments.TheTribunalfurtherheldthatiftheAssessing Officerisdoubtingthegenuinenessthesamecouldbeconsideredinhandsofpartnersandnotin theassessmentoffirm.(A.Y.200506) ACITv.MeghMalharDevelopers(2012)134ITD437(Ahd.)(Trib.) S. 69: Unexplained moneyIncome from undisclosed source Statement under section 132(4)Additiononthebasisofloosepapersfoundwasconfirmed. The Assessing Officer has made addition on the basis of loose papers found and the statement jointly signed by the assessee. On appeal Commissioner (Appeals) deleted the addition on the groundthatthepersonwhohasgiventhestatementdidnotappearbeforetheAssessingOfficerfor crossexamination.Tribunalheldthatloosepaperwassignedbyassesseeandthatitisindicativeof thefactthattheimpugnedamountwasgivenasloanbyassessee.OnappealHighCourtheldthat theTribunalhasdecidedtheissuebasedonfactualaspectsandthereforetheorderofTribunalwas upheld. BhanuvijaysinghM.Vacheladeceased,throughLegalHeirv.ITO(2012)65DTR201/246CTR274 (Guj.)(HighCourt) 24 http://www.itatonline.org

 S.69: Unexplained moneys Firm Partner Capital. Addittion can not be made in the assessmentoffirm.(S.68) Initial capital introduced by partners before commencement of business of firm, could not be treatedasundisclosedincomeofassesseefirmeveniftheAssessingOfficerwasnotsatisfiedwith theexplanationofferedbyfirmexplainingthesourceofsaidincome.Atthemosttheadditioncould bemadeinhandsofindividualpartnersoffirm.(A.Y.200405) G.L.Foodsv.ITO(2012)134ITD159(Luck.)(Trib.) S. 69A: Unexplained investments Sale of shares Short term capital gains Addition as incomefromundisclosedsourcewasconfirmed. Assesseehasshowntheprofitonsaleofshares,theCourtobservedthatthesaleofShareswerenot listed.Itwasalsoobservedthatthesalewastakenplacein1998andpaymentwasreceivedbythe assessee was in next year. No explanation was offered why the payment was delayed about one year and three months. The Court held that purchase and sale of shares was not genuine and additionasundisclosedincomewasjustified.(A.Y.199798) CITv.RanaGurjitSingh(2012)340ITR108(P&H)(HighCourt) S.73: Losses in speculation businessComputation of gross total income to be made by applying the normal provisions of the Act Share loss to be first setoff to determine what grosstotalincomeconsistsofthereafterExplanationapplies. The departments submission that in computing the gross total income for the purpose of the explanation to section 73, income under the heads of Profits and gains of business must be ignoredand/orthatthesharelossshouldnotbeallowedtobesetoffagainsttheincomefromany othersourceundertheheadProfitsandgainsofbusinessisnotacceptablebecauseitleadstoan incongruous situation where in determining whether a company is carrying on a speculation businesswithinthemeaningoftheExplanation,subsection(1)ofsection73isappliedinthefirst instance.ThisisnotpermissibleasamatterofstatutoryinterpretationbecausetheExplanationis designed to define a situation where a company is deemed to carry on speculation business. It is only thereafter that subsection (1) of section 73 can apply. Applying the provisions of section 73(1)todeterminewhetheracompanyiscarryingonspeculationbusinesswouldreversetheorder ofapplication.Legislaturehasmandatedthatinordertodeterminewhethertheexceptionthatis carvedoutbytheExplanationapplies,acomputationofthegrosstotalincomehastobemadein accordance with the normal provisions of the Act and it is only thereafter that it has to be determined whether the gross total income so computed consists mainly of income which is chargeableundertheheadsreferredtointheExplanationtosection73ornot. CITv.DarshanSecuritiesPvt.Ltd.(Bom.)(HighCourt)www.itatonline.org S.80:ReturnLossesRevisedreturnisheldtobevalidandisallowedtocarryforwardand setoff.[S.70,71,139(5)] Assessee filed the original return under section 139(1) declaring the positive income. Assessee found certain mistake thereafter and filed revised return declaring the loss and to be carried forwardandsetoffinfuture.TheTribunalheldthattherevisedreturntobetreatedasvalidreturn andtheassesseeisentitledtocarryforwardoflongtermcapitalloss.(A.Y.200506) RameshR.Shahv.ACIT(2012)65DTR104(Mum.)(Trib.) 25 http://www.itatonline.org

 S.80HH: DeductionNew industrial undertakings Manufacture Production Forging processSubcontractreceipts. Assesseeclaimeddeductionundersection80HH,inrespectofsubcontractreceipts.TheCourtheld thatKrishnapuranunitoftheassesseecompleteshotforgingandaftertheprocesscomestoPadi wherethereisfurthervalueadditionandafter assembling nutsandbolts,theyare marked.Thus onlyaftertheprocesscarriedonbytheKrishnapuranunit,thatthecommoditiesreachastageof marketability, therefore, it satisfied the test as given in section 80HH, hence receipt of job work doneeligiblefordeductionundersection80HH.(A.Ys.198990and199293). SundaramFastenersLtdv.CIT(2012)246CTR95(Mad.)(HighCourt) S.80HHC:DeductionExportComputationProfitsofbusinessDEPBsaleproceedsisnot profitsThefacevalueofDEPBshallbedeductedfromthesaleproceeds.[S.28(iiid)] DEPB is cash assistance receivable against exports under the scheme of the Government. While the face value of the DEPB falls under clause (iiib) of section 28, the difference between the sale valueandthefacevalueoftheDEPB(theprofit)willfallunderclause(iiid)ofsection28.DEPB representspartofthecostincurredbyapersonformanufactureoftheexportproductandhence evenwheretheDEPBisnotutilizedbytheexporterbutistransferredtoanotherperson,theDEPB continuestoremainasacosttotheexporter.WhenDEPBistransferred,theentiresumreceivedon such transfer does not become his profits. It is only the amount that he receives in excess of the DEPBwhichrepresentshisprofitsontransferoftheDEPB. TopmanExportsv.CIT(SC)www.itatonline.org S.80HHC:DeductionExportComputationInterestNettingExplanation(baa)tosection 80HHC,refernettingofincomefromexpenditure. UnderClause(1)ofExplanation(baa)tosection80HHC,90%ofanyreceiptsbywayofbrokerage, commission, etc. included in any such profits have to be deducted from the profits & gains of business. The expression included any such profits means such receipts by way of brokerage, commission, etc included in the profits & gains. Therefore, if any quantum of receipts by way of brokerage,commission,etcisallowedasexpensesundersection30to44Dandisnotincludedin the profits of business, 90% of such quantum of receipts cannot be reduced under clause (1) of Explanation(baa)tosection80HHC.Inotherwords,only90%ofthenetamountofanyreceiptof thenaturementionedinclause(1)whichisactuallyincludedintheprofitsoftheassesseeistobe deducted from the profits of the assessee for determining profits of the business. (Principle in Distributors(Baroda)P.Ltd.v.UOI(1985)155ITR120(SC)followed;CITvShriRamHondaPower Equip(2007)289ITR475(Delhi)(HighCourt)approved). ACGAssociatedCapsulesPvt.Ltdv.CIT(SC)www.itatonline.org S.80HHC:DeductionExportExportfromthirdcountry. Assesseeisengagedinpurchaseandsaleofnonferrousmetals,scraps,skimmingashesetc.,who made purchases from one country and made exports to another country at margin of profit by arrangingdirectshipmentfromthepurchasingcountrytothesellingcountry.TheCourtheldthat insection80HHC,thereisnoexpresswordswhichprovidethattheexportofsuchgoodstobefrom India. There need not be two way traffic of bringing the goods from a foreign country into the IndianshoresandthereafterexportingthatgoodsfromIndianshorestotheoffshore,becauseitis amereemptyformalityandmeaninglessritualinwhichthecountrygainsnothing.Iftheobjectof earningofforeignexchangeisachievedthentheassesseeisentitledtoentitledtodeductionunder section80HHC.(A.Ys.198990to200203) 26 http://www.itatonline.org

 AnilKumarv.ITO(2012)65DTR49/246CTR194(Karn.)(HighCourt) S.80HHC:DeductionExportAdditionasunexplainedcashcredits.(S.68) Assessee is engaged in export business. Assessing officer made addition under section 68 on account of unexplained cash credits appearing in books of assessee. Assessee deduction under section 80HHC in respect of addition made on account of creditors. The Tribunal held that since creditorsinassesseescaserepresentedpurchasers,benefitofsection80HHCwastobeallowedto assessee.(A.Y.200102). Dy.CITv.DivineInternational(2012)134ITD148(Delhi)(Trib.) S.80HHE:DeductionExportComputersoftwareForeigncurrencyDevelopmentandexport ofsoftware. The Tribunal has not considered the relevant documents which would clearly show that the expensesincurredinforeignexchangewastowardstechnicalservicesrenderedoutsideIndiaand not for development of software outside India. Once it is held that expenditure incurred for the relevantassessmentyearspertainstotechnicalservicesoutsideIndia,thesamehastobeexcluded from the export turnover for the purpose of arriving at the deduction admissible under section 80HHE,therefore,HighCourtsetasidethefindingofTribunal.(A.Y.199394to199697) CITv.InfosysTechnologiesLtd.(2012)65DTR353/246CTR371(Karn.)(HighCourt) S.80IA:Deductions Profits and gains from infrastructure undertakings Joint venture Consortium. Assessee company formed joint venture which was awarded a contract a contract by irrigation department.40percentageofworksawardedwastobeexecutedbyassesseeasoneofconstituents of JV and 60 percent by other constituent. Similarly, assessee also formed consortium along with oneCTofMoscowandassesseewastoexecute100percentofworkswhichwereawardedtosaid consortium. Assessee claimed deduction under section 80IA(4) on profits of aforesaid works. AssessingOfficerdisallowedtheclaim.TheTribunalheldthat(1)onfactsthejointventureisonlya dejurecontractorandassesseeisdefactocontractor.(2)Thejointventureandassesseecannotbe heldtobemaincontractorandmembersassubcontractors.(3)Eachjointventurewouldstandin relationtoaprincipalaswellasagentofothers(4)SinceJointventureandconsortiumwasformed onlytoobtainthecontractfromGovernmentbody,benefitofdeductionunderprovisionsofsection 80IA(4)wastobeallowedtoanyenterprisecarryingonbusinessofdevelopingoroperatingand maintaininganyinfrastructurefacilitysubjecttofulfillmentofotherconditions.(A.Y.200607). Transstory(India)Ltd.v.ITO(2012)134ITD269(Viskhapatanam)(Trib.) S. 80IB: DeductionsProfits and gains from industrial undertakingsManufacture or productionRuleofconsistencyAppealHighCourt.(S.10BA(2)(e),260A) Department has not challenged the decision of Tribunal in the case of assessee for earlier years holdingthattheassesseeisengagedinmanufacturingactivityandthusentitledtodeductionunder section 80IB. High Court refused to entertain the question applying the rule of consistency.(A.Y. 200506) CITv.Arts&CraftsExports(2012)66DTR85/246CTR463(Bom.)(HighCourt) Editorial:ReferArts&CraftsExportsv.ITO(2012)66DTR69/(2011)45SOT415(Mum.)(Trib.) S.80IB : Deductions Profits and gains from industrial undertakingsExcise duty income Insuranceclaim. 27 http://www.itatonline.org

 Exciseincomeandinsuranceclaimreceivedforshortageofmaterialisentitletodeductionunder section80IB.(A.Y.200607) ITOv.ElectroFerroAlloysLtd.(2012)13ITR594(Ahd.)(Trib.) S.80IB(10):Deduction Undertaking Developing and buildingHousing Project Eligible evenifdevelopernotownerofland. Theassesseeenteredintoadevelopmentagreementwiththeownerofthelandpursuanttowhich it agreed to develop the land. Deduction under section 80IB(10) in respect of the profits arising from the said activity was claimed on the ground that it was derived from the business of undertaking developing and building housing project approved by the local authority. The AssessingOfficer&CIT(A)rejectedtheclaimonthegroundthattheassesseewasnottheowner of the land and that the approval of the local authority to, and the completion certificate of, the housingprojectwasgiventotheownerandnottotheassessee.However,theTribunalallowed theclaim.OnappealbythedepartmenttotheHighCourt,HELDdismissingtheappeal: Section80IB(10) allows deduction to an undertaking engaged in the business of developing and constructing housing projects. There is no requirement that the land must be owned by the assessee seeking the deduction. Under the development agreement, the assessee had undertaken thedevelopmentofhousingprojectatitsownriskandcost.Thelandownerhadacceptedthefull priceofthelandandhadnoresponsibility.Theentireriskofinvestmentandexpenditurewasthat of the assessee. Resultantly, profit and loss also accrued to the assessee alone. The assessee had total and complete control over the land and could put the land to the agreed use. It had full authorityandresponsibilitytodevelopthehousingprojectbynotonlyputtinguptheconstruction but by carrying out various other activities including enrolling members, accepting members, carryingoutmodificationsengagingprofessionalagenciesandsoon.Theriskelementwasentirely thatoftheassessee.Theassesseewasadeveloperincommonparlanceaswellaslegalparlance andcouldnotberegardedasonlyaworkscontractor.TheExplanationtosection80IBinserted w.r.e.f.1.4.2001hasnoapplicationastheprojectisnotaworkscontract.Further,astheassessee was,inpartperformanceoftheagreementtoselltheland,givenpossessionandhadalsocarried out the construction work for development of the housing project, it had to be deemed to be the ownerundersection2(47)(v)r.w.s.53AoftheTOPActeventhoughformaltitlehadnotpassed (FaqirChandGulativs.UppalAgencies(2008)10SCC345distinguished) CITv.RadheDevelopers(2012)204Taxman543(Guj.)(HighCourt)www.itatonline.org S.80IB(10):DeductionUndertakingDevelopingandbuildingHousingProjectCompletion certificateResidentialunitsBuiltupareaasdefinedunderlocalauthorityAssesseesclaim wasallowed. Assessee is a builder is engaged in construction and development of residential units. For the relevantyearstheassesseefileditsreturnofincomedeclaringnilincomeafterclaimingdeduction under section 80IB(10). The Assessing Officer rejected the claim on the ground that completion certificate was issued on later date by Municipal Authorities and covered area /built up area of residential units was more than prescribed limit. Tribunal found that as the housing project was approvedbylocalauthorityon2232001(Before1stdayof2004),samehadtobecompletedonor before 3132008. As per the clarification issued by Municipal corporation date of completion of projectwas2722008.WhenthelaunchofprojecttheIncometaxActdidnotdefinethebuiltup areaAsperM.P.NagarGrahNirmanAdhiniyaamandM.P.BhumiVikasNiyam,1984,whichwere applicabletoassessescase,builtupareawaslessthanprescribedlimitof1500sq.ft.Inviewofthe 28 http://www.itatonline.org

 facts the order of Assessing Officer was set aside and the assessees appeal was allowed. (A.Ys. 200203to200607) GlobalRealityv.ITO(2002)134ITD407(Indore)(Trib.) S.80IC: Deduction Special category states Computation Eligible businessHead office expensesApportionmentofexpensesFinancialexpenses. Oneunitoftheassesseeiseligiblefordeductionundersection80IC,whereasothertwounitsare not eligible for deduction under section 80IC. The Assessee has filed a consolidated statement without substantiating individual items as to how why they should not be considered for the purposeofallocationofcommonexpenses.TheCourtheldthatallocationoffinancialexpensesto theeligibleunithastobeintheratioofturnoveroftheeligiblebusinesstothetotalturnoverfor thepurposeofcomputingdeductionundersection80IC.(A.Y.200607) Controls&SwitchgearCo.Ltd.(2012)66DTR161(Delhi)(HighCourt) S.80P:DeductionsCooperativesocietiesBankingbusinessCancellationoflicense. AssesseewasregisteredunderMultiStateCooperativeSocietiesAct,1984andwassubsequently notifiedbyGovernmentofMaharashtraasaStateCooperativeBankandReserveBankofIndiaalso gave assessee,licence under Banking Regulation Act, 1949.Maharashtra State Governments notification and licence by Reserve Bank of India were challenged by Maharashtra State Co operativeBankLtd.,byawritpetitionbeforeBombayHighCourt.HighCourtallowedthepetition, thereuponReserve Bankof Indiacancelledassesseeslicence witheffect from30102003.During the relevant assessment year the assessee filed the return of income claiming deduction under section 80P(2)(a)(i).Assessing Officer rejected assessees claim. In an appeal before the Tribunal, theTribunalheldthatasthelicencewascancelledtheincomeofthesocietycannotbeconsidered as banking business eligible for deduction under section 80P(2)(a)(i), reason that assessee no longerremainedaStatecooperativeBank.(A.Y.200506) ApexUrbanCooperativeBankofMaharashtra&GoaLtd.v.ITO(2012)134ITD118(Mum.)(Trib.) S.90:DoubletaxationreliefAgreementwithforeigncountriesDTAAIndiaMauritius. IndoMauritius DTAA and Circular No. 789 dated 1342000, would not preclude Incometax department fromdenyingtaxtreaty benefits,ifitisestablished,onfacts,thatMauritiuscompany hasbeeninterposedasownerofshareinIndia,attimeofdisposalofsharetoathirdpartly,solely with a view to avoid tax without any commercial substance. In such a situation, notwithstanding factthatMauritianCompanyisrequiredtobetreatedasbeneficialownerofsharesunderCircular No.789andDTAA,thetaxdepartmentisentitledtolookatentiretransactionofsaleasawholeand takeintoconsiderationrealtransactionbetweenpartiesandtransactionmaybesubjecttotax. Vodafone International Holdings B.V.v. UOI (2012)341 ITR 1/ 204 Taxman 408/247 CTR 1/66 DTR 265(SC) S. 90 : Double taxation relief Avoidance of taxNonresidentBusiness support services FinancialservicesDTAAIndiaNetherland.(S.195,Article12) SSSABV,acompanyincorporatedinNetherlands,throughitsbranchinthePhilippines,isproviding back office financial services relating to accounts etc.to the Applicant. Consideration paid by the applicant,anIndiancompanytoSSSAB,aDutchcompanyisgovernedbythetreatybetweenIndia andNetherlandsandnottheonebetweenIndiaandPhilippinesandsinceSSABVisprovidingback office services to then applicant without any involvement of the latter, the consideration paid for theservicesisnotoffeesfortechnicalserviceswithinthemeaningofArticle12.5(b)oftheDTAA 29 http://www.itatonline.org

 betweenIndiaandNetherlandsandtherefore,itisnotchargeabletotaxinIndia.Sincethereisno liabilitytotaxinIndia,applicanthasnoobligationtowithholdtaxundersection195. ShellTechnologyIndia(P)Ltd.(2012)65DTR34/246CTR158/204Taxman314(AAR) S.92C: Avoidance of tax Transfer pricingArms length price Subsidiary International transactionNotinexcessof5%variation. Assessee was a wholly owned subsidiary of U.S. based company MTC. It entered into a support agreement with assessee for research services and corporate support services which was an international transaction. For bench marking assessees international transactions TPO took various companies and made additions. Before Commissioner (Appeals) the assessee submitted thatcomparablecasesidentifiedbyTPOwerenotengagedinsimilaractivitiesasthatofassessee.It was also contended that the TPO has ignored the comparable of another subsidiary where in the businessisidentical.TheCommissioner(Appeals)heldthattheTPOarbitrarilyselectedSLtd.as comparable and ignored C Ltd as comparable. Commissioner (Appeals) further held that had C had been considered as comparable then arithmetic mean all comparable selected by TPO and assesseewouldbeonly11.71percentageandapplyingsafeharborrulesintermsofsecondproviso below section 92C(2), difference in price between one adopted by TPO and ALP determined by includingCLtdwouldbewithin+or5percentrangecallingfornoadjustmenttopriceadopted byassesseeinrespectofinternationaltransaction,accordinglytheCommissioner(Appeals)deleted theadditionmadebytheTPO.TribunalconfirmedtheviewofCommissioner(Appeals).(A.Y.2003 04&200405) Dy.CITv.MonsantoHoldings(P)Ltd.(2012)134ITD189(Mum.)(Trib.) S.92C: Avoidance of tax Transfer pricingTPO can rely on contemporaneous data even if notavailableatspecifieddate. In a transfer pricing appeal, the Tribunal had to consider two issues: (a) what is the data to be consideredbytheTPOatthetimeofdeterminingALP?&(b)whethertheassesseeshouldbegiven anopportunitytorefutethematerialsoughttobeutilizedbytheTPO?HELDbytheTribunal: (i) Under Rule 10D(4) the information and documents should as far as possible be contemporaneousandshouldexistslatestbythespecifieddatespecifiedinsection92F(4)i.e.the due date for filing the ROI. There is no cutoff date upto which only the information available in public domain can be taken into consideration by the TPO while making the transfer pricing adjustments and arriving at the ALP. The assessees argument that section 92D and Rule 10D is defeatediftheTPOtakesthedatawhichisavailableinthepublicdomainafterthespecifieddateis notacceptable. (ii) While the TPO is empowered by section 131(1) & 133(6) to call for information without informing the assessee about the process, he cannot use such information against the assessee without giving the assessee a reasonable opportunity of hearing. If the assessee seeks an opportunitytocrossexaminethirdparties,ithastobegiventheopportunity(GenisysIntegrating Systemsfollowed) KodiakNetworks(India)Pvt.Ltd.v.ACIT(Bang.)(Trib.)www.itatonline.org S.92C: Avoidance of taxTransfer pricing TPO is duty bound to eliminate differences in comparablesdata. In a Transfer Pricing matter, the Tribunal had to consider whether for purposes of making adjustment under Rule 10B(1)(e)(iii) working capital constituted a difference between the international transactions and the comparable uncontrolled transactions of between the 30 http://www.itatonline.org

 enterprisesenteringintosuchtransactionsandifsowhetherthesaiddifferencecouldmaterially affect the amount of net profit margin of relevant transactions in the open market. Held by the Tribunal: Rule 10B(1)(e)(iii) provides that the profit margin arising in comparable uncontrolled transactionshastobeadjustedtotakeintoaccountthedifferences,ifanybetweentheinternational transactionandthecomparableuncontrolledtransactions,orbetweentheenterprisesenteringinto such transactions, which could materially affect the amount of net profit margin in the open market.Whilethedifferencesarenotspecified,itcoversanydifferenceswhichcouldmaterially affect the amount of net profit margin. The litmus test to be applied is if the difference, if any, is capableofaffectingtheNPMinopenmarket?Ifyes,thentheTPOisunderstatutoryobligationto eliminatesuchdifferences.Therevenuecannotsaythatdifferenceislikelytoexistinallaccounts and so the demands of the assessee should be ignored. The revenues stand that the assessee is ineligible for any adjustments if he provides the set of comparable is not correct because under Rule10(3)itisthedutyoftheAO/TPO/DRPtominimize/eliminatethedifferencewhichislikelyto materially affect the price. It is the settled proposition that working capital adjustment is an adjustment that is required to be made in TNMM. The revenues contention that the differences specified should refer to only (i) the factor of demand and supply; (ii) existence of marketable intangiblesi.e.brandnameetc;(iii)geographicallocationandthelikeisnotacceptable.Further,as thedifferenceintheArmslengthOperatingMarginoftheComparablesbeforeandaftermakingthe adjustmentforworkingcapitalwasupto3.77%,itwasmaterialandhadtobeeliminated(Mentor Graphics(2007)109ITD101(Delhi),EgainCommunication(2008)118ITD243(Pune)SonyIndia( 2008)114ITD448(Delhi)&TNTIndiafollowed). DemagCranes&Components(India)v.Dy.CIT(Pune)(Trib)www.itatonline.org S.92C: Avoidance of taxTransfer pricing ComputationArms length price RoyaltyCup method. Assesseehaspaid3%ofthenetsalesprice,whichwasapprovedbyRBI. The Tribunalhasfound that the assessee had sold only part of goods manufactured to its Associated enterprise and bulk salesweremadetouncontrolledparties,andtheAssessingOfficerhadfailedtobringanymaterial on record to show that payment of royalty @ 3% was not at arms length, hence disallowance of royaltywasnotjustified.(A.Y.200607) SonaOkegawaPrecisionForgingsLtd.v.Addl.CIT(2012)65DTR317(Delhi)(Trib.) S.92C:AvoidanceoftaxTransferpricingComputationArmslengthpriceReimbursement ofcostJurisdictionofAssessingOfficer. Assessee has reimbursed only cost of one employee who is sitting in Singapore. Assessee has produced evidence in the form of emails to substantiate its case that it has actually obtained services from its group companies and justified the commercial expediency of reimbursement of cost to said concerns by relating the payment to revenue earned by it from such services, the Tribunal held that there is no justification for adjustment to the ALP in respect of the payments made by the assessee to its group concerns. The Tribunal also held that once an international transaction has been made subject of determination of ALP by the TPO, and he has found that transactionisatarmslength,thenitisnotpermissiblefortheAssessingOfficertoreexaminethat transactionandmakedisallowanceunderthenormalprovisionsoftheAct.(A.Y.200607) Cushman&WakefieldIndia(P)Ltdv.ACIT(2012)66DTR28(Delhi)(Trib.) S.92C:Avoidance of tax Transfer pricing Computation Arms length priceFunctional methodCombiningallinternationaltransactionisnotproper. 31 http://www.itatonline.org

 Assesseecompanywhichisinthebusinessofprovidingbuyingservicestoassociatedenterprises for sourcing of garments, handicrafts, leather products etc. in India. Assessee determined ALP on transaction by transaction basis using most appropriate method having regard to functional analysis and availability of comparable uncontrolled bench mark. TPO determined ALP by combiningalltransactionsundertakenbyassessee.Tribunalheldthatinassesseescase,therewere different segmental activities, which were independent of each other, they are required to be analyzedontransactiontotransactionbasisandnotbycombiningallactivities,hencethemethod adoptedbytheassesseeiscorrectandupheldthecomputationofassessee.(A.Y.200607) BenettonIndia(P)Ltd.v.ITO(2012)134ITD229(Delhi)(Trib.) S.115JA:BookprofitCompanyDeductionExportDeductionundersection80HHCisto becomputedasperP&LProfitsandnotnormalprovisions.(S.80HHC,115JB) Incomputingbookprofitsundersection115JA&115JB,theassesseeclaimedthatthededuction admissiblethereundersection80HHChadtobecomputedonthebasisofthebook profitsand not on the basis of the income computed under the normal provisions of the Act. This claim was upheld by the Tribunal by relying on the judgment of the Special Bench in Dy. CIT v. Syncome Formulations (I) Ltd.(2007)106 ITD 193(Mum.)(SB) (Trib.). On appeal by the Revenue, the High Court[CITv.AIKabeerExportsLtd.(2010)233CTR443(Bom.)]reversedtheTribunal.Onappeal bytheassessee,TheApexCourtheldreversingtheHighCourt: In view of this Courts Order in the case of CIT vs. Bhari Information Technology Systems(2012) 340 ITR 593(SC)upholding the judgment of the Special Bench of Tribunal in Dy. CIT v. Syncome Formulations(I)Ltd.(2007)106ITD193,theimpugnedjudgmentoftheHighCourtissetasideand thejudgmentsoftheITATinthesecasesstandaffirmed. AlKabeerExportsLtd.v.CIT(SC)www.itatonline.org S.115JA:CompanyBookprofitDeductionExport.(S.80HHC,115JB) Incomputingbookprofitsundersection115JA,115JB,thedeductionundersection80HHChadto be allowed on the basis of book profits and not by applying the normal provisions of the Act for computationdeduction.(A.Ys.2001,200304) CITv.C.P.S.TextilesP.Ltd.(2012)340ITR590(Mad.)(HighCourt) S.115JB:CompanyBookprofitSTPunitExemptincomeCompaniesAct.(S.10A) Book profits prepared by Company in accordance with Companies Act can neither be interfered with by Assessing Officer nor could assessee adjust the same except as provided under the Companies Act. In terms of clause (3) of Explanation to section 115JB(2) lower of amount of loss broughtforwardorunabsorbeddepreciationistobereducedfrombookprofitanditisamountas per books of account and not as per Income tax records which has been computed under the provisions of Incometax Act. Therefore while computing book profit under section 115JB and makingadjustmentsthereunderasprovidedinExplanationthereto,aggregateofprofits/lossesof bothSTPandnonSTPunitsistobetakenintoconsiderationandnotprofitorlossesofnonSTP unitsonly.(A.Y.200506) YokogawaIndiaLtd.v.Dy.CIT(2012)49SOT173(Bang.)(Trib.) S. 115VD: Shipping companies Qualifying ship Tonnage tax scheme Ship operating in coastal waters and ship operating in international watersEntitled to for the benefit of tonnagetaxscheme. 32 http://www.itatonline.org

 Tonnage tax scheme does not distinguish between ships operating in costal waters and ships operatinginInternationalwatersandtherefore,theshipoperatedbytheassesseefortransporting thermalcoalfromonelocationtoanotherlocationwithincountryisaqualifyingshipundersection 115VDandassesseeisentitledforthebenefitoftonnagetaxscheme.(A.Y.200607) ACITv.WestAsiaMaritimeLtd.(2012)65DTR16/143TTJ129(Chennai)(TM)(Trib.) S. 115WB: Fringe benefitsSales promotion expenses can not classified as gift.(S. 115WD,115WO) Assessee in order to promote its products, from time to time formulated schemes which entitled distributors / dealers /stockiest to specific articles /presents depending upon volume of sales achieved through stockiest/ dealer etc. Value of said articles presents would be considered as advertising/salespromotionexpensesfallingundersection115WB(D)andcouldnotbeclassified undersection115WB(O)treatingitasgiftastheexpenditurehasdirectnexuswithsalespromotion andpublicity.(A.Y.200607) BirlaCorporationLtd.v.Dy.CIT(2002)134ITD142(Kol.)(Trib.) S. 132: Search and seizure Warrant of authorization Condition precedent Satisfaction Inspectionmustbeallowed.(S.153A) For issuing warrant of authorization satisfaction must be based on information coming into possessionofdepartment.Intheabsenceofnewmaterialwithauthorities,loosesatisfactionnotes placed by authorities based on the high growth of company, is not sufficient to meet the requirementsofprovisions.Accordinglytheactionofsearchandseizurewasheldtobeinvalid.As thesearchandseizureheldtobeinvalidthenoticesundersection153Awasheldtobebadinlaw. The Court also held that if appropriate prayer is made, inspection of such documents may be requiredtobeallowed.(A.Ys.200405to200910) Spacewood Furnishers Pvt. Ltd. and others v. DIG (Investigation)(2012) 65 DTR 281/204 Taxman 392/246CTR313(Bom.)(HighCourt) S. 132:Search and seizure PowerInterrogation till late night amounts to torture & violation of human rights Officers are held liable for to pay compensation from their salary. The assessees premises were searched under section 132 and alleged undisclosed income of Rs. 4.18 crores was detected. The assessee filed a complaint before the Bihar Human Rights Commission stating that interrogation & recording of statement was conducted for more than 30 hoursandtilltheoddhoursofthenightwithoutanybreakorintervalandthisviolatedhishuman rights.TheCommissionupheldthepleaanddirectedtheconcernedofficialstoshowcausewhythe assessee should not be compensated from their salary. The Department filed a Writ Petition to challengetheorder,heldbytheCourt: (i)Theinterrogationcontinuedtill3.30a.m.onthesecondnightofsearchandseizureasperthe departmentsrecord.Thesearchandseizuremanualdoesnotprescribe anytimelimitforsearch andsurveyoperationandthesame maycontinuefordaysif required,butithastobeinkeeping withthebasichumanrightsanddignityofanindividual.ThepurposeoftheActistogiveeffectto the process of execution of actions of executive and bureaucratic machinery in line of accepted standardofbasichumanrightswhichareinternationallyrecognized.Thelaws,andapproachtolaw foritsexecutionmustconfirmtothecharterofhumanvaluesanddignity.Evenapersonaccusedof aseriousoffencehastobeproducedbeforethenearestMagistratewithin24hoursminusthetime takeninreachingtheCourt.Thereisnopossiblejustificationtocontinueinterrogationandkeepthe 33 http://www.itatonline.org

 assessee awake till 3 a.m. on the second night of search and interrogations. No reason has been assignedastowhytheinterrogationscouldnothavebeendeferredtillthemorningofthenextday. The officials could have continued with the interrogation on the next day in the morning after allowing the assessee to retire at an appropriate time in the night. Sleep deprivation method of interrogationamountstoinhumantreatmentandviolationofArticle3oftheEuropeanConvention on Human Rights. The Convention prohibits in absolute terms torture or Inhuman or degrading treatment or punishment. No exception to Article 3 can be made even in the event of Public Emergency threatening the life of the Nation. Accordingly, the department is guilty of violating humanrightseventhoughtheoperationswereconductedinbestinterestofrevenueandgoodfaith (Ireland vs. UK (1978) ECHR 1, Kalashnikov vs. Russia (2002) ECHR 596 &Salmouni vs. France (2000)29EHRR403followed;RajendranChingaravelu2010(1)SCC45distinguished) (ii)However,astheCommission,withoutissuinganynoticetotheofficialsengagedinthesearch (as to the violation of Human Rights), issued notice on why monetary compensation be not awarded and be recoverable from their salary, it had prejudged the officials as being guilty of violationofhumanrights,withoutaffordingthemanopportunityofhearing.Thiswascontraryto section16oftheProtectionofHumanRightsAct,1993andhadtobereversed. CCITv.RajendraSingh(Patna)(HighCourt)www.itatonline.org S.132(4A):SearchandseizureBlockassessmentDiaryseizedPresumptionisapplicable. (S.158BC) In the course of search a diary was found which contained the noting of higher value of value purchaseof propertythanshowninthebooksofaccount.Theauthorofthediarywassonofthe partner,whostatedthathehaswrittenthediaryasperinstructionofhispartner.Onthebasisof diary addition was made in the block assessment. The addition was deleted by the Tribunal. On appealthecourtheldthatthepresumptionundersection132(4A)isapplicablehenceadditionis justifiedinblockassessmentastheauthorofdiarywassonofthepartner CITv.AmbikaAppalamDepot(2012)340ITR497(Mad.)(HighCourt) S.132A:SearchandseizureUnexplainedcashSeizedbypoliceWritisnotmaintainable warrantofauthorizationisheldtobevalid.Article226. Cash of Rs. 6.5 Lacswas seized by police from the vehicle in which the petitioner was travelling. Thereafter warrant of authorization was issued under section 132A, by Director of IT(Inv.)requiringthepoliceauthoritiestodelivertheseizedcashtotheIncometaxdepartmentand the cash was deposited in Court. Assessee filed a writ petition to quash the proceedings on the groundthattheamountofRs.6.50seizedfromhimon23rdJan.,2001wastheamountreceivedby him on sale of agricultural lands and as against sale of house on various dates beginning from 3rdJune,1994.TheCourtheldthatitwasnotclearhowandunderwhatcircumstancestheamounts receivedbythepetitionerduringtheperiodofsixyearswerekeptbyhimorwerecarriedbyhim onthesaiddate.Astheexplanationwasnotaconvincing,thewritisnotmaintainableunderArticle 226oftheConstitutionofIndia. AttaHusainv.DirectorofIncomeTax(Investigation)&Ors.(2012)246CTR207(MP)(HighCourt) S.132B:Search and seizure Retained asset Cash and other assets Assets seized from partnerscannotbeadjustedagainstadvancetaxliabilityoffirm. Duringthecourseofsearchproceedings,cashandotherdocumentsfrombusinesspremisesaswell asresidentialpremisesofpartnersofassesseefirmwereseized.Aftercompletionofassessmentof the firm,the assessee filed application under section 154 and requested the Assessing Officer to 34 http://www.itatonline.org

 adjust payment of Rs. 1.52 croresin P.D. account against tax liability of assessee. Revenue authorities were rejected the application. The Tribunal held that in view of provisions of section 132B(3),AssessingOfficercannotapplyseizedassetsfordischargeofliabilityofpersonotherthan person from whose custody assets were seized. Since in instant case,unexplained cash and jewellerywereseizedfrompartnersofassesseefirmsaid,unexplainedcashandjewellerycouldbe adjustedagainstpartnersoffirmandnotfirm.Evenotherwisesincetherequestforadjustmentof amountofPDhadbeenmadebyconcernedpersons/partnersafterduedateofpaymentofadvance tax,requestmadecouldbeconsideredonlyagainstregularandfinaltaxliabilityofassesseeandnot againstadvancetaxliability.(A.Y.200708) SummerBuildersv.Dy.CIT(2012)49SOT210(Mum.)(Trib.) S.139:AssessmentReturnRevisedcomputationRevisedstatementisnorrevisedreturn, assessmenthastobebasedonasperoriginalreturn.. Assesseecannotrevisehisreturnbywayoffilingarevisedstatementofincome,afterfilingoriginal return. In the absence of revised return as prescribed under section 139(5), Assessing Officer is boundtomaketheassessmentasperoriginalreturn.(A.Y.200607) Orissa Rural Housing Development Corporation Ltd. v. ACIT (2012) 66 DTR 73/ 247 CTR 137 (Orissa)(HighCourt) S. 139: Assessment ReturnElectronic filing of return Nonreceipt of form ITRV by the departmentAssesseeispermittedtofilethereturn. Assesseefurnishedadequatematerialtoshowthatafterfilingthereturnelectronically,ithadalso submitted Form ITRV by ordinary post thrice the impugned communications issued by the DepartmenttreatingthereturnasinvalidonthegroundthatFormITRVhasnotbeenreceivedis thoroughlymisconceived,sincetheorderofassessmentfortherelevantassessmentyearhasstill not been passed, assessee is permitted to file a verification of the return before the Assessing Officerwithinaperiodofoneweek.(A.Y.200910) CrawfordBayley&Co.v.UOI(2012)66DTR157/246CTR459(Bom.)(HighCourt) S.139:AssessmentReturnRevisedreturnLossCarryforwardandsetoffisallowd.(S. 70,71,80) Assessee filed the original return under section 139(1) declaring the positive income. Assessee found certain mistake thereafter and filed revised return declaring the loss and to be carried forwardandsetoffinfuture.TheTribunalheldthattherevisedreturntobetreatedasvalidreturn andtheassesseeisentitledtocarryforwardoflongtermcapitalloss.(A.Y.200506) RameshR.Shahv.ACIT(2012)65DTR104/143TTJ166(Mum.)(Trib.) S.142(1):AssessmentLimitationNoticeHeldtobeinvalid. By Finance Act, 2006, the legislature has added proviso in section 142(1)(i) to the effect that an assessmentframedpursuanttoanoticeissuedundersection142aftertheendoftheassessment yearwouldalsobevalid,therefore,noticeissuedaftertheendoftherelevantassessmentyeari.e. after31stMarch,1988wasnotinvalid.(A.Y.199798) DITv.EricssonA.B.(2012)66DTR1/246DTR422(Delhi)(HighCourt) DITv.EricssonRadioSystemA.B.(2012)66DTR1/246DTR422(Delhi)(HighCourt) DITv.MetapathSoftwareInternational(2012)66DTR1/246DTR422(Delhi)(HighCourt) S.142(1):AssessmentValidityNoticesheldtobevalid.[S.143(2)] 35 http://www.itatonline.org

 Section142(1)empowerstheAssessingOfficertoissuenoticeundersection142(1)forproduction ofaccountsanddocumentsforthepurposeofmakingassessment.Noticeundersection143(2)is issued requiring the assessee to produce his accounts, evidences and particulars on which the assessee may rely in his support of his claim made in the return. On the facts the notice under section142(1)wasissuedon3rdOctober,2008whereasnoticeundersection143(2)wasissuedon 10thOctober, 2007. There is no sequence prescribed as to what manner notices under section 142(1) and 143(2) are to be issued, therefore, there is nothing to say that notice under section 142(1) should precede notice under section 143(2).Therefore notice issued under section 143(2) on10thOctober2007iswithintheperiodoflimitation.(A.Y.200607) Orissa Rural Housing Development Corporation Ltd. v. ACIT (2012) 66 DTR 73/ 247 CTR 137 (Orissa)(HighCourt) S.143(3):AssessmentNonexistingamalgamatingcompanyHeldtobeinvalid..(S.292B) Assessee filed the return and the fact of amalgamation was brought into the notice of Assessing Officer, it was incumbent on the Income Tax Authorities to substitute the successor in place of dead person. A company dies on its dissolution as per the provisions of the Companies Act. Therefore assessment order made in the name of assessee is void. Mere participation by the assesseeinsuchproceedingsisofnoestoppelsagainstthelaw,thereforeassessmentinthenameof a company which has been amalgamated with another company and stands dissolved is null an void; assessment in the name of a non existing entity is a jurisdictional defect and not merely a procedural irregularity of the nature which can be cured by invoking the provisions of section 292B.(A.Ys.200203&200304) SpiceInfotainmentLtd.v.CIT(2012)65DTR391(Delhi)(HighCourt) S. 143(3): Assessment Validity Without signatureAssessment order without Assessing officerssignatureisvoid.(S.156,292B) TheAssessingOfficerpassedanassessmentorderundersection143(3)andissuedtheIncometax ComputationForm(ITNS150),DemandNoticeundersection156andPenaltyNoticeundersection 271(1)(c). While all the other documents were signed by the Assessing Officer, the assessment order was not. In reply to the assessees contention that the assessment order was invalid, the department relied on section 292B and Kalyankumar Ray v. CIT(1991) 191 ITR 634 (SC) and arguedthattheActdoesnotrequiretheserviceofanassessmentorderandtheserviceofavalid ITNS150&demandnoticewassufficient.Tribunalheldrejectingthedepartmentsplea: Section143(3)contemplatesthattheAssessingOfficershallpassanorderofassessmentinwriting. Iftheassessmentorderissignedthenbecausethecomputationoftaxisaministerialact,ITNS150 neednotbe signedbytheAssessing Officer.However,ifthe assessmentorderisnotsigned,then the fact that he has signed the tax computation form and the notice of demand is irrelevant. The omission to sign the assessment order cannot be explained by relying on section 292B. If such a courseispermittedto befollowedthanthatwouldamount todelegationofpowers conferred on theAssessingOfficerbytheAct.DelegationofpowersoftheAssessingOfficerundersection143(3) is not the intent and purpose of the Act. An unsigned assessment order is not in substance and effect in conformity with or according to the intent and purpose of the Act (Kilasho Devi Burman(Mrs.)andotherv.CIT(1996)219ITR214(SC)followed;KalyankumarRay(1991)191ITR 634(SC)explained) VijayCorporationv.ITO(Mum.)(Trib.)www.itatonline.org 36 http://www.itatonline.org

 S.143(3):AssessmentRevisedcomputationDeductiononinterestDirectiontoconsiderthe claimandallow. Assessee during the course of assessment proceedings filed revised computation of income and claimed additional deduction in respect of payment of interest. Assessing Officer refused to considertherevisedclaimonthegroundthattheassesseehasnotfiledtherevisedreturnunder section139(5).InappealCommissioner(Appeals)upheldtheorderofAssessingOfficerrelyingon the Supreme Court decision in Goetze India Ltd. (2006) 284 ITR 323 (SC). Tribunal referring the judgment in Pradeep Kumar Harlakarv.Asstt.CIT (2011) 47 SOT 204(URO)(Mum) (Trib)admitted the claim made by the assessee and restored the matter to the file of Assessing Officer with the directiontoconsidertherevisedcomputationofincomefiledbytheassesseeanddecidetheissuea fresh.(A.Y.200607) RachnaS.Talrejav.Dy.CIT546(2012)43B.BCAJFeb.,2012P.26(Mum.)(Trib.) S. 145:Assessment Method of accounting LeaseIn a finance lease, claim for lease equalizationchargeasperICAIGuidelinesisallowable.[S.28(i)] Theassesseereceivedleasechargesandclaimedareductiontowardsleaseequalizationcharges onthegroundthatreductionwasinaccordancewiththeGuidanceNotedated20.09.1995issuedby the ICAI in respect of Accounting for Leases and the Accounting Standard AS1 notified under section145whichmandatedthattheaccountingpolicyoftheassesseeshouldrepresentatrueand fair view. The Assessing Officer &CIT(A) rejected the claim on the ground that it was a notional charge and that the accounting guidelines could not override the Act. The Tribunal, however, allowedtheclaim.Onappealbythedepartment,helddismissingtheappeal: (i)AsthemethodforaccountingforleaserentalswasbasedontheGuidanceNoteAccountingFor Leases issued by the ICAI, the Assessing Officer was not entitled to disregard the same. The GuidanceNotereflectsthebestpracticesadoptedbyaccountantstheworldoverandthefactthatit was not mandatory is irrelevant. The ICAI is recognized as the body vested with the authority to recommend Accounting Standards for ultimate prescription by the Central Government under section211(3C)oftheCompaniesAct.AlsoAS1pertainingtoDisclosureofAccountingPolicieshas mandatory status for periods commencing on or after 01.04.1991. The change by the assessee in thepolicyofaccountingforleaseshadtheimprimaturoftheICAIandsotheAssessingOfficerwas notentitledtodisregardthebooksofaccountsorthemethodofaccountingforleases; (ii) The departments contention that the lease equalization charge is a claim in the form of a deductionwhichcannotbeallowedasthereisnoprovisionundertheActisbasedonacomplete misappreciation of what constitutes a lease equalization charge. As the transaction was a finance lease,thechargehadtobeprovidedaspertheICAIGuidelines.Aslongasthemethodemployedfor accountingofincomemeetswiththerudimentaryprinciplesofaccountancy,oneofwhich,includes offering only revenue income for tax, no fault can be found with the assessee debiting lease equalization charges in its profit and loss account. This represented the true and fair view of the accounts; a statutory requirement under section 211(2) of the Companies Act, enabled determinationofrealincome. CITv.VirtualSoftSystemsLtd.(Delhi)(HighCourt)www.itatonline.org Editorial:VirtualSoftSystemsLtd.v.ACIT(2010)38SOT412 S.147:AssessmentReassessmentFullandtruedisclosureNoticeafterexpiryoffouryears ValidFailuretodiscloseExemptionInvestmentinspecifiedbondsReopeningisheldto bevalid.(S.54EC) Assessee submitted computation of total taxable long term capital gains of Rs. 23.19 crores in its return of income and sought exemption under section 54EC of Rs. 23.24 crores. Assessment was 37 http://www.itatonline.org

 completed under section 143(3).Assessing Officer issued notice under section 148. The assessee challenged the notice in a writ petition. The Court held that Assessee having claimed exemption undersection54ECwithoutmakinganyreferencetothedatesonwhichamountswereinvestedin thespecifiedbondseitherinthereturnorinthedisclosureswhichweremadeinresponsetothe query of the Assessing Officer there was no full and proper disclosure of all material facts by the assessee and therefore, Assessing Officer was justified in reopening the assessment beyond the periodoffouryearsonthegroundthatincomehasescapedassessment.(A.Y.200405) Indian Hume Pipe Co. Ltd. v. ACIT (2012) 65 DTR 26/246 CTR 31/ 204 Taxman 347 (Bom.)(High Court) S. 147:Assessment Reassessment Full and true disclosure Notice after expiry of four yearsFailuretodisclosematerialfactsnecessaryWaiverofpartofloanReassessmentheld invalid. Assesseehaddisclosedthewaiverofloansinthenotesonaccount.TheAssessingOfficercalledfor detailsandaftersatisfyingwiththeexplanationtheassessmentwaspassedundersection143(3). Thereafterthenoticewasissuedundersection148,readwith147toreopentheassessment.The assesseechallengedthereassessmentproceedings.TheCourtheldthattherewasnofailureonthe part of assessee to disclosure material facts hence the reassessment after four years held to be invalid.(A.Y.200405) KimplasTrentonFittingsLtd.v.ACIT(2012)340ITR299(Bom.)(HighCourt) S. 147:Assessment ReassessmentFull and true disclosureIncome forming subject matter ofappealReassessmentheldtobeinvalid. The assessee had claimed certain amount as bad debts, which the Assessing officer has allowed partly. In appeal the Commissioner (Appeals) partly allowed the appeal. In the mean time the AssessingOfficerissuedthenoticeundersection147readwith148onthegroundthattheassessee hadclaimedthebaddebts,inrespectofpartieswheretheincomehadbeenexemptundersection 10(23G).InaWrittheCourtheldthatCommissioner(Appeals)havingpartlyallowedtheassessees appeal by accepting its claim under section 36(1)(vii) and allowing a proportionate exemption undersection10(23G),theexerciseofpowertoreopentheassessmentonthegroundsrelatingto writeoffofbaddebtsundersection36(1)(vii)isinexcessofjurisdictioninviewofbarofsecond proviso to section 147, it could not be said that income had escaped assessment by reason of excessive deduction under section 36(1)(viia) when the Assessing Officer has infact, allowed a deduction to the extent of 7.5% of the business income instead of 7.5% of total income and thereforereopeningofassessmentonthisgroundisalsonotvalid.(A.Y.200304) ICICI Bank Ltd. v. Dy. CIT (2012) 65 DTR 249 /246 CTR 292/ 204 Taxman 65 (Mag.)(Bom.)(High Court) S. 147:Assessment Reassessment Penalty Writ Alternative remedy Held not maintainable.(S.69B,271(1)(c),ConstitutionofIndiaArticle226) Assessee did not file objections against reassessment, hence there was no breach of principle of natural justice. Writ is not maintainable as it does not fall within the exceptional categories for invoking extraordinary jurisdiction under Article 226 and the impugned reassessment order as well as penalty order being appealable before the Appellate Authority, the writ was dismissed as notmaintainable.(A.Y.200607) SushilaKanwarChauhanv.UOI(2012)65DTR5(Raj.)(HighCourt) 38 http://www.itatonline.org

 S. 147:Assessment Reassessment Not for correction of errorsNot to recomputed the incomeonsamesetoffactsreassessmentwasnotvalid. The petitioner had been returning its income from plying oil tankers for several years. The claim towards drivers expenses was within the knowledge of the assessing officer and also the subject matter of consideration at the stage of original assessment. The finding of the successorinoffice ignoringthefindingsofthepredecessorontheissueanddisallowingtheexpensesinentiretywasa case of change of opinion on the same set of facts and could not be permitted. The reassessment wasnotvalidandwasliabletobequashed.(A.Y.200102) KumarStoresv.CIT(2012)340ITR90(Patna)(HighCourt) S. 147:Assessment ReassessmentIssues not included in reasons not recorded Reassessmentisheldtobevalid.[S.148(2)] TheCourtheldthatExplanation3tosubsection3tosection147oftheActhasbeeninsertedby theFinance(No.2)Act,2009,retrospectivelyfromApril1,1989,andthustheAssessingOfficeris justifiedinmakingadditioneveninrespectofthoseissueswhichcometohisnoticesubsequently in the course of reassessment proceedings though such issue was not included in the reasons recordedwhileinitiatingproceedingsundersection147oftheAct.(A.Y.199899) BalbirChandMainiv.CIT(2012)340ITR161(P&H)(HighCourt) S.147:AssessmentReassessmentAfterfouryearsheldinvalidandwithinfouryearsheld validDepreciationandrevenueexpenditure. Noticeu/s148forassessmentyears199192and199293wereissuedafterfouryears.Therewas nomentionintherecordedreasonsthattheescapementofchargeableincomefromtaxwasdueto omissionorfailureonthepartoftheassesseetodisclosefullyandtrulyallmaterialfactsnecessary for the assessment. The notices in respect of the assessment years 199192 and 199293 was quashed.ReassessmentfortheAsst.years199394,withinfouryearsheldtobevalidinrespectof depreciationandrevenueexpenditure.(A.Ys.199192,199293&199394) SriSakthiTextilesLtd.v.Jt.CIT(2012)340ITR144(Mad.)(HighCourt) S. 147:Assessment Reassessment Limitation After four years but before six years ClubbingofincomeBenamidarReassessmentisjustified.(S.149) Fordifferentfinancialyearsupto200102theassesseemadeseveralpaymentstoMr.Mitra.For the assessment year199495 an amount of Rs. 3,03,345 was made by the assessee to Mr.Mitra. Based on the above information the assessment was reopened. The Court held that as no proper explanationwasfurnishedforpaymentexceedingthreelakhsofRupeesprimafacieescapementof incomeofincomeofmorethanonelakhofRupees.Onmeritclubbingofincomeofthirdpersonas benamidarofassesseewasjustified.(A.Y.199596) M.R.Associatesv.IncomeTaxAppellateTribunalandothers(2012)340ITR293(All)(HighCourt) S.147:AssessmentReassessmentDroppedtheproceedingsinrespectofincomereferred in the notice Assessing the other income not mentioned in the notice is not valid. [S. 148, 152(2)] Assessmentwasreopenedonthebasisofbeliefthatcertainincomehadescapedassessmentbutin thereassessmentorderpassedundersection147bytheAssessingOfficernoadditionwasmadein respectofsaidincome.Inrespectofotherincomesnonoticewasissuedandtheassesseehadno opportunity to put forward his case under section 152(2) to avail benefit of said section for 39 http://www.itatonline.org

 dropping the proceedings and the revenue cannot take advantage of the Explanation 3 to section 147.(A.Y.199798) ACITv.MajorDeepakMehta(2012)65DTR237/246CTR255(Chhattisgarh)(HighCourt). S. 147:Assessment Reassessment292BB Delay in issue of notice under section 143(2), noticerendersassessmentinvalid.(S.292BB) The Assessing Officer issued a notice under section 148 to reopen the assessment. Though the assessee filed a ROI, the Assessing Officer did not issue the section 143(2) notice within the prescribed period but passed a draft assessment order under section 144C. The Court had to consider(a)whatistheeffectofthefailuretoissuenoticeundersection143(2)withintheperiod stipulatedintheprovisotoclause(ii)and(b)theeffectofsection292BBoftheAct.HELDbythe Courtquashingtheassessmentproceedings: (i)Theserviceofnoticeundersection143(2)withinthestatutorytimelimitismandatoryandis not an inconsequential procedural requirement. Omission to issue notice under section 143(2) is not curable and the requirement cannot be dispensed with. Section 143(2) is applicable to proceedingsundersection147&148.WhiletheProvisotosection148protectsandgrantsliberty to the Revenue to serve notice under section 143(2) before passing of the assessment order for returns furnished on or before 1.10.2005, in respect of returns filed pursuant to notice under section 148 after 1.10.2005, it is mandatory to serve notice under section 143(2) within the stipulatedtimelimit(HotelBlueMoon321ITR362(SC)referred). (ii)Section292BBincorporatestheprincipleofestoppelsandstipulatesthatanassesseewhohas appearedinanyproceedingandcooperatedinanyenquiryrelatingtoassessmentorreassessment shall be deemed to be served with any notice which was required to be served and would be precludedfromobjectingthatthenoticewasnotserveduponhimorwasserveduponhiminan impropermannerorwasnotserveduponhimintime.However,theprincipleofestoppelsdoesnot applyiftheassesseehasraisedobjectioninreplytothenoticebeforecompletionofassessmentor reassessment.AstheAssessingOfficerhadpassedadraftassessmentorderandtheassesseehad raisedanobjectionbeforecompletionofassessment,theestoppelinsection292BBdidnotapply andthesection147proceedingscouldnotcontinue. AlpineElectronicsAsiaPteLtd.v.DGIT(2012)341ITR247(Delhi)(HighCourt)www.itatonline.org S.147:AssessmentReassessmentRetrospectiveamendmentnobasisbeyond4yearsheld tobeinvalidAssessingOfficernottodelaypassingobjectionorderdirectionisgivenallthe AssessingOfficers. ForA.Y.200506,theAssessingOfficerpassedasection143(3)orderinwhichheallowedsection 80IAdeduction.Thereafter,aftertheexpiryof4years,hereopenedtheassessmentundersection 147onthegroundthatinviewoftheretrospectiveamendmenttotheExplanationtosection80IA bytheFinance(No.2)Act2009w.r.e.f.1.4.2000,the assessee,being aworkscontractor,wasnot eligibleforsection80IAdeduction.TheAssessingOfficertook6monthstodealwiththeobjections and passed the assessment order within 2 weeks. On a Writ Petition filed by the assessee to challengetheassessmentorder,heldallowingthePetition: (i)ThefactthatbyvirtueoftheExplanationtosection80IAaddedwithretrospectiveeffectfrom 1.4.2000, income derived from the works contract would not qualify for deduction under section 80IAdoesnotmeanthatanassessmentcanbereopenedbeyond4yearswithouttherebeingany failuretodisclosetrulyandfullyall materialfacts(Sadbhav Engineering Ltdv.Dy.CIT(2011)333 ITR483(Guj.)followed); 40 http://www.itatonline.org

 (ii) The argument that the assessee failed to disclose the nature of works executed and that the same was executed only as works contractor and not as a developer, cannot be accepted for two reasons.Firstly,thereasonsrecordeddonotrefertosuchaground.Secondly,whentheassessee filedthereturnofincome,theExplanationinquestionwasnotinpicture.Theassesseecannotbe expectedtocomplywiththerequirementsofsuchExplanationbymakingdisclosuresinthisregard whichExplanationdidnotformpartofthestatutebookwhenhefiledhisreturn; (iii)TheAssessingOfficershaveatendencytodelaydisposingoftheobjectionsand,thereafterat thefagendoffinaltimelimit,toframetheassessment.Thistendencyisnotapproved.Thiswasnot the intention of the Apex Court when GKN Driveshafts (India) Ltd. v. ITO(2003) 259 ITR 19 (SC) wasrendered.ThisshouldbebroughttothenoticeoftheAssessingOfficersbytheDepartmentso thatsuchinstancesdonotrecurinfuture. DoshionLtd.v.ITO(Guj.)(HighCourt)www.itatonline.org S. 147:Assessment Reassessment Sanction of Commissioner instead of Jt. CIT renders reopeninginvalid. The Assessing Officer issued a notice under section 148 to reopen an assessment. As a section 143(3) order had not been passed & 4 years had elapsed, the Assessing Officer ought to have obtainedthesanctionoftheJoint/AdditionalCITundersection151(2).Instead,heroutedthefile through the Additional CIT and obtained the sanction of the CIT. On appeal by the assessee, the Tribunalstruckdownthereopeningonthegroundthatcorrectsanctionhadnotbeenobtained.On appealbythedepartment,heldupholdingtheTribunal: (i)Section151(2)requiresthesanctiontobeaccordedbytheJoint/AdditionalCIT.TheAssessing OfficersoughtthesanctionoftheCIT.ThoughthefilewasroutedthroughtheAddl.CIT,thelatter only made an endorsement CIT may kindly accord sanction. This showed that the Addl. CIT did notapplyhismindorgaveanysanction.Instead,herequestedtheCITtoaccordapproval.Thisis notanirregularitycurableundersection292B; (ii)Thedifferentauthoritiesspecifiedinsection 116haveto exercisetheirpowersin accordance with law. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the otherauthority.Ifthestatuterequiresathingtobedoneinacertainmannerithastobedonein thatmanneralone.Also,thedesignatedauthorityshouldapplyhisindependentmindtorecordhis satisfactionanditshouldnotbeatthebehestofasuperiorauthority. CITv.SPLsSiddharthaLtd.(Delhi)(HighCourt)www.itatonline.org S.147:Assessment ReassessmentFull and true disclosure Subsequent decision of JurisdictionalHighCourtinfavourofrevenueAmountstochangeofopinionreassessment isinvalid.(S.44BB) Assessing Officer assessed the income of the assessee under section 44BB, by passing the order under section 143(3), after due application of mind and making necessary enquiry. Reopening of assessment on the basis of subsequent decision of Jurisdictional High Court holding in favour of revenueamountedthechangeofopinion,henceinvalid.(A.Y.200304) B.J.Services Company Middle East Ltd.& Ors.v. Dy. CIT (2012) 65 DTR 316/ 246 CTR 381 (Uttarakhand)(HighCourt) S.147:AssessmentReassessmentTimeavailableforissueofnoticeundersection143(2) Reassessmentishedtobebadinlaw.. 41 http://www.itatonline.org

 Reassessmentundersection147cannotbemadewithinthetimeavailableforissuingnoticeunder section 143(2) and for completion of assessment under section 143(3).The Court held that as Madras and Delhi High courts have held that an income escaping assessment under section 147 cannot be completed within the time available for issuing notice under section 143(2) and for completionofassessmentundersection143(3)andsincethesedecisionsremainunchallengedby the department, the department appeal was dismissed (CITv. TCP Ltd. (2010) 323 ITR 346 (Mad.),CITv.QatalysSoftwaretechnologiesLtd.(2009)308ITR249(Mad.)andKLMRoyalDutch Airlinesv.ADIT(2007)292ITR49(Delhi)followed.)(A.Ys.19992000,200001,200203&2003 04). CITv.AbadFisheries(2012)65DTR370/204Taxman267/246CTR513(Ker.)(HighCourt) S.147:Assessment Reassessment Reason to believeAbsence of any new material New industrialundertakingReassessmentisheldtobeinvalid.[S.80IA(4)(iii)] Assessing Officer reopened the assessment on the ground that for the relevant assessment year mainlyonthegroundthatthepetitionersindustrialparkwasnotnotifiedbytheCBDTtilltheend of relevant year, therefore deduction under section 80IA(4)(iii) was wrongly claimed and granted.The Court held that the assessment was completed under section 143(3), and there is nothingontherecordtopointoutanynewmaterialjustifyingtheissueofnoticeundersection148, moresothesameissuehasbeenexaminedbytheCourtinthecaseofthepetitioneritselfandthe questionshavebeenadjudicatedinfavourofthepetitioner. GaneshHousingCorporationLtd.v.Dy.CIT(2012)66DTR106/242CTR465(Guj.)(HighCourt) S. 147:Assessment Reassessment Change of opinionDecision based on judgments Reassmentisbadinlaw.. TheAssessingOfficerhadtakendecisionintheoriginalassessmentbyconsideringthejudgments thatdeductionsundersection80HHCand80IAaretobeseparatelycomputed.TheTribunalheld that,ifthereisadecisioninfavourofassesseethenthesameistobeappliedandthustheAssessing Officerhastakenonepossibleview.TheTribunalhasheldthattheconceptofchangeofopinion must be treated as an in built test to check the abuse of power. On the facts there is no tangible materialwithAssessingOfficerforthepurposeofinitiatingreassessment,hencethereopeningof assessmentisbadinlaw.(A.Y.200304) ACITv.HycronIndia(2012)65DTR97/143TTJ226(Jd.)(Trib.) S. 147:Assessment Reassessment Reasons Irrelevant and nonexisting reasons Reassessmentisheldinvalid. In the reasons recorded for reopening of assessment the Assessing Officer received information fromtheDy.DirectorofIT(Inv.)andonthebasisofastatementofthebankmanger,thatassessee purchaseddemanddraftincashbutitwasfoundthatnosuchdemanddraftwasissuedinfavourof assessee.TheTribunalheldthattheAssessingOfficerproceededforreopeningofthe assessment onnonexistentandfactuallyincorrectreasonsandhadnotappliedindependentmindanddidnot verify the information received from the Dy. Director of IT (Inv.),therefore reassessment was invalidandunjustified.(A.Y.199394). MahadevTradingCo.v.ITO(2012)65DTR140/143TTJ492(Ahd.)(Trib.) S.147:AssessmentReassessmentRecordingofreasonsAfterissueofnoticeFullandtrue disclosure Notice after expiry of four years Eligible exemption Reassessment held valid.(S.11,148) 42 http://www.itatonline.org

 Department representative submitted documentary evidence in the form of internal correspondence to demonstrate that the reasons recorded by the Assessing Officer for reopening theassessmentexistedpriortotheissueofnoticeundersection148,hencethenoticewasheldto be valid. Assessee mentioned no against the amount eligible for exemption under section 11(1)(d)inthereport,inthereturnitclaimeddeductionofRs.15,83,100aseligibleforexemption undersection11(1)(d),therewasfailureonthepartoftheassesseetodisclosefullyandtrulybasic facts required for making the assessment and the same constituted valid reason that escaped assessment(A.Y.19992000) SinghadTechnicalEducationalSocietyv.ACIT(2012)143TTJ352(Pune)(Trib.) S. 147: Assessment Assessment under section 143(1), cannot be reopening in absence of newmaterial.(S.143(1),148) TheAssessingOfficerhasacceptedtheROIfiledbytheassesseeundersection143(1).Hethereafter issuedanoticeundersection148onthegroundthattheassesseehadclaimedadeductionforERP softwareandthatalthoughonly20%ofthesaidexpenseswasdebitedtotheP&LA/c,theentire amountwasclaimedasadeduction.Theassesseeclaimedthatthereopeningwasnotvalidasthere wasnonewmaterialintheAssessingOfficerspossession.Tribunalheldupholdingtheplea: Thoughtheassessmentwasoriginallyundersection143(1),itisclearlyevidentfromtherecorded reasons that there was no new material coming to the possession of the Assessing Officer on the basisofwhichthesection143(1)assessmentwasreopened.InTelcoDadajiDhackjeeLtd.,v.Dy.CIT (ITA No. 4613/M/2005 dt. 1252010(Mum.)(Trib.)(Unreported), the Third Member held, after consideringACITv.RajeshJhaveriStockBrokersP.Ltd.(2007)291ITR500(SC)&CITv.Kelvinator of India Ltd. (2010) 320 ITR 561 (SC), that a section 143(1) assessment could not be reopened undersection147withouttherebeinganynewmaterialcomingtothepossessionoftheAssessing Officer. As the Assessing Officer had reopened the section 143(1) assessment on the basis of the materialwhichwasalreadyonrecord,thereopeningwasnotvalid. HVTransmissionsLtd.v.ITO(Mum.)(Trib.)www.itatonline.org S.148:AssessmentReassessmentNoticeissuedwithinlimitationperiodisvalidevenif serviceislater.(S.149) ForA.Y.199899,theAssessingOfficerissuedanoticeundersection148dated28.3.2005(within thelimitationperiodof6years).However,asthisnoticewasreturnedunserved,asecondnotice dated 17.6.2005 (beyond 6 years) which issued & served. The assessee contended that since the AssessingOfficerhadissuedasecondnotice,thefirstonewasnonestandasthesecondnoticewas issuedbeyondlimitationperiod,theassessmentproceedingswerenullandvoid.TheCIT(A)upheld theplea.BeforetheTribunal,theAMheldthattherewasadifferencebetweenissueofthenotice anditsserviceandthatthenoticedated28.3.2005wasvalid,thoughnotserved,andthesecond notice was invalid and nonest. The JM took a contrary view and held that the first notice was invalidandthesecondnoticehavingbeenissuedafterthelimitationperioddidnotgivejurisdiction tomaketheassessment.OnareferencetotheThirdMember,held: The Act makes a clear distinction between issue of notice and service of notice. Section 149 which prescribes the period of limitation provides that no notice under section 148 shall be issued after the expiry of the limitation period. The service of the notice is necessary under section 148 only to make the order of assessment. Once a notice is issued within the period of limitation,theAssessingOfficerhasjurisdictiontomaketheassessment.Anoticeisconsideredto havebeenissuedifitisplacedinthehandsofapersonauthorizedtoserveit,andwithabonafide intent to have it served. Service of the notice is not a condition precedent to conferment of 43 http://www.itatonline.org

 jurisdiction on the Assessing Officer but it is a condition precedent to the making of the order of assessment.Onfacts,astheAssessingOfficerhadissuedthenoticewithintheperiodoflimitation, hehadjurisdictiontoreopentheassessment(R.K.Upadhyayav.ShanabhaiP.Patel(1987)166ITR 163(SC)followed). Error!Hyperlinkreferencenotvalid.(Trib.)www.itatonline.org S. 151:Assessment Reassessment SanctionChallenge after lapse of eight years CircumstantialevidenceNotjustified.(S.147,148) The Tribunal held that the assessee cannot challenge the issue of notice under section 148 in second round of appeal as regards noncompliance of conditions precedent required by section 151(2)afterlapseofmorethaneightyears,moresowhentheveryfactthattheassesseedidnot choosetomakesuchacclaimtillthefileistransferredfromtheITOWard17(2)wouldcastadoubt onthecorrectnessoftheclaimofassessee.(A.Y.199394) LaxminaryanAgrwal(HUF)v.ITO(2012)143TTJ175(Mum.)(Trib.) S. 153A:Assessment Search and seizureSpecial procedure for assessmentAbatement of regular assessment which has became final is not justified Departmental appeal was allowed.(S.132) Onlyanassessmentorreassessmentpendingonthedateofinitiationofsearchundersection132 orrequisitionundersection132Ashallabateunderthesecondprovisotosection153A.Evenifan appeal is pending against a competed assessment before the Tribunal on the date of search, such completed proceedings do not abate. The Court observed that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under section 271(1)(c). The materialfoundinthesearchmaybegroundfornoticeandassessmentundersection153A,butthat wouldnoteffaceorterminatealltheconsequenceswhichhavearisenoutoftheregularassessment or reassessment resulting in to the demand or proceedings of penalty. Accordingly the Tribunal erredinlawinabatingtheregularassessmentproceedings,whichhadbecamefinal,andrestoring themasaconsequenceofsearchundersection132andnoticeundersection153Atothefileofthe AssessingOfficer.(A.Y.200203) CITv.ShailaAgrwal(Smt)(2012)65DTR41/246CTR266/204Taxman276(All)(HighCourt) S. 153A:AssessmentSearch and seizureSpecial procedure for assessmentAbatement of pending assessment New claim for deduction Claim made for first time before Commissioner(Appeals).Commissionercanentertaintheclaim.(S.132) While filing the return in response to notice under section 153A, assessee voluntarily disallowed the interest of Rs. 58.86 which was disallowed in the original assessment, However a note to the return of income was annexed claiming the said interest was allowable. Assessing Officer has accepted the loss as returned by the assessee. In appeal before Commissioner (Appeals), it was contended that the funds available in the hands of the assessee were mixed and there was no questionofapportionmentofsuchfundsavailablewithassessee.Afterobtainingtheremandreport he disallowed the interest of Rs. 10,81,326/ and deleted the remaining amount.In appeal before theTribunalitwascontendedthattheCommissionerwaserredingivingrelieftotheassesseeon theincomedisclosedbyhiminthereturnofincomefiledundersection153A,ignoringthefactthat the Assessing Officer has merely assessed the total income at the returned income. Secondly, in view of Apex Court judgment in Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC), the 44 http://www.itatonline.org

 Commissioner (Appeal) should not have entertained the claim of assessee.Tribunal held that requirementofsection153Aistocomputethetotalincomeofeachsuchassessmentyearswithout anyreferencetowhatwasdoneintheoriginalassessment,hencetheassesseeisentitledtoseek reliefonanyadditionwhichwasmadeintheoriginalassessment.Asregardstheclaimmadebefore theCommissioner(Appeals)followingtheratioofNationalThermalPowerCoLtdv.CIT(1998)229 ITR383(SC),theTribunalcanexamineandentertaintheclaimprovidedfactsareexistsonrecord for examination the claim. Accordingly the Tribunal dismissed the appeal of the revenue. (A.Y. 200102) Dy.CITv.EversmileConstructionCo.(P)Ltd.(2012)65DTR39/143TTJ322(Mum.)(Trib.) S.154:AssessmentRectificationofmistakeNonconsiderationofSupremeCourtdecisionisa mistakeapparentonrecordandcanberectified. Assessee suffered the loss from the export of trading goods, which ought to have been adjusted against90percentoftheexportincentiveasperthedecisionoftheSupremeCourt.Highcourtheld thatnonconsiderationofthejudgmentoftheSupremeCourtandnonapplicationoftheratioofthe judgment of the Supreme Court to the facts of the present case is a glaring,patent and obvious mistake of law which can be rectified under section 154.Accordingly the appeal of revenue was allowed.(A.Y.200203) CITv.SatishKumarAgarwal(2012)66DTR68(Delhi)(HighCourt) Editorial:ReferCircularNo.71dated20121971(1972)83ITR(St)91 S.158BC:BlockassessmentSearchandseizureUndisclosedincomeAnnulmentInterest isnotpayable.(S.132,158BFA) Whentheassessmentundersection158BCoftheIncometaxAct,1961itselfhasbeenannulledon thegroundofadefectivenotice,interestfordelayinfilingthereturnwouldnotbepayableunder section158BFA. CITv.MicroNovaPharmaceuticalsP.Ltd.(2012)340ITR118(Karn.)(HighCourt) S. 158BC:Assessment Block assessmentSearch and seizure Undisclosed incomeSet off againstmiscellaneousreceiptsisentitledtosetoffLevyofsurchargesubjecttothedecision oflargerbenchofsupremecourt.(S.132,158BFA) TheAssessingOfficerandtheappellateauthorityheldthattheassesseewasnotentitledtosetoffof theamountasmiscellaneousincomewasshownasincomefromothersourcesandnotfromarrack business the unaccounted sale of arrack and the miscellaneous income shown in the books of account by the assessee. The Tribunal held that the assessee is entitled to setoff. As regards estimate of undisclosed income the Tribunal confirmed the addition. The Court held that as the assesseehimselfadmittedthathehadnotincludedtheexcisedutyinthesaleprice,whichwasRs.2 perofsuchsale,theinclusionoftheexcisedutywasunassailableandlevyofsurchargeandinterest was also justified.The Court made it clear that the levy of surcharge shall be subject to the larger benchdecisionoftheSupremeCourtinthecaseofCITv.RajivBhatara(2009)310ITR105(SC). J.P.Narayanaswamyv.Dy.CIT(2012)340ITR193(Karn.)(HighCourt) S. 163:Representative assessesliability of representative assessesNonresidentAgent Sectionisnotattracted.(S.161) Once a person comes with in any of clauses of section 163(1), such a person would be agent of nonresidentforpurposeofAct,however,merelybecauseapersonisanagentoristobetreatedas anagent,wouldnotleadtoanautomaticconclusionthathebecomesliabletopaytaxesonbehalfof 45 http://www.itatonline.org

 nonresident. As per section 163(1)(c), income should be deemed to accrue or arise in India and thereforesaidsectionisnotattractedwhenthereisnotransferofcapitalassetsituatedinIndia. VodafoneInternationalHoldingsB.V.v.UOI(2012)341ITR1/204Taxman408/247CTR1/66DTR 265(SC) S.194A: Deduction at source Interest Damages Delayed allotment of flats not liable to deductatsource.[S.2(28A)] Intereston amountdepositedon accountofdelayed allotmentofflatsdoesnotfallundersection 2(28A),theamountbeinginnatureofdamagestheassesseeisnotliabletodeducttaxatsource. CITv.H.P.HousingBoard(2012)340ITR388(HP)(HighCourt) S. 194C:Deduction at source Contractor Payments made by school to bus contractors providingpickanddropfacilityiscontractandnotrent.(S.194I) Paymentsmadebyschooltobusoperatorsforprovidingpickanddropfacilitytoschoolstudentsis not a case of hire of machinery but of service rendered by transport contractor to assessee, thereforesection194Cisapplicableandnotsection194I.(A.Y.200809) LotusValleyEducationalSocietyv.ACIT(2012)13ITR61(Delhi)(Trib.) S.194C:DeductionatsourceSubcontractorCanteencontractorsissubcontractor.. Assessee entering in to contract with another person for carrying out part of work undertaken. Deduction at 1% is proper and order of Commissioner (Appeals) was confirmed. (A.Ys. 200506 &200607) Dy.CITv.AbanOffshoreLtd.(2012)13ITR180(Chennai)(Trib.) S.194H : Deduction at source Commission Brokerage In absence of principalagent relationship,payment,thoughcalledcommission,notcovered.(S.201) The assessee obtained a bank guarantee and paid bank guarantee commission. The Assessing Officer &CIT(A) took the view that since the payment was characterized as commission it fell withintheambitofsection194HandtheassesseeoughttohavedeductedTDS.Theassesseewas heldliableasassesseeindefaultundersection201.Onappealbytheassessee,heldreversingthe AssessingOfficerandCommissioner(Appeals): Section194Hdefinestheexpressioncommissionorbrokeragetoincludeanypaymentreceived by a person acting on behalf of another person for services rendered or for any services in the courseofbuyingorsellingofgoods.Applyingtheprincipleofnosciturasociis&ejusdemgeneris, the expression commission has to take its colour from the expression brokerage. As the expression brokerage, in common parlance and in law, means fees or commission given to or chargedbyabroker,theexpressioncommissionmustbeconfinedtoapaymentmadetoagents etcforeffectingsalesandcarryingoutbusinesstransactionsandcannotextendtopaymentswhich are for services rendered or products offered on a principal to principal basis. A principalagent relationshipisasinequanonforinvokingtheprovisionsofsection194H.Asthereisnoprincipal agent relationship between a bank issuing the bank guarantee and the assessee, the payment, thoughtermedcommission,isnotcoveredbysection194H(SRLRanbaxyLtd.vsACIT(2012)143 TTJ265(Delhi)(Trib.)referred). KotakSecuritiesLimitedv.Dy.CIT(Mum.)(Trib.)www.itatonline.org. S. 194I : Deduction at source Rent Payment to State Electricity BoardTransmission of electricityNotliabletodeductatsource. 46 http://www.itatonline.org

 Payments made by assessee, a State Electricity Board, to PGCIL for transmission of power purchasedbyitfromNTPCwasmadefortheservicesoftransmissionofelectricityandnotforuse of transmission wires per se in as much as these transmission lines are used not only for transmissionofelectricitytotheassesseebutalsofortransmissionofelectricitytovariousother entities, and the assessee has no say in the manner in which such transmission lines can be controlledorusedbyPGCILandthereforesection194Ihasnoapplicationinrespectofimpugned paymentsfortransmissionofelectricity.(A.Ys.200607to200910) ChhattisgarhStateElectricityBoardv.ITO(2012)65DTR1/143TTJ151(Mum.)(Trib.) S.194J:DeductionatsourceTechnicalservicesPaymentsmadebyschooltocontractorsfor trainingstudentsinhorseridingLiabletodeductatsource.(S.194C) The assessee entered into a contract with Mustang Riding School to provide five horses for Rs. 10,000/perhorsepermonthalongwithqualifiedandexperiencedinstructortoteachthechildren horseriding.Theschooldeductedthetaxatsourceaspersection194CoftheIncometaxAct.The Assessing Officer held that it was fee for professional or technical services to the assessee and therefore,invoked section 194J. The order was up held by the Commissioner (Appeals) and Tribunal.(A.Y.200809) LotusValleyEducationalSocietyv.ACIT(2012)13ITR61(Delhi)(Trib.) S.195:Deduction at source Commission Nonresident AgentBusiness connection AmountsnotdeductibleNotliabletodeductatsource.[S.40(a)(i)] Assessee has paid sales commission to its holding company Eon Technology UK. The Court held that, when a nonresident agents operates outside the country,no part of income arises in India, andsincepaymentisremitteddirectlyabroad,andmerelybecauseanentryinthebooksofaccount ismadeinIndia,itdoesnotmeanthatnonresidenthasreceivedanypaymentinIndia,therefore, assesseeisnotliabletodeducttaxatsourcehence,nodisallowancecanbemadebyapplyingthe provisionofsection40(a)(i).(A.Y.200708). CITv.EonTechnology(P)Ltd.(2012)246CTR40(Delhi)(HighCourt) S.195: Deduction at source NonresidentProduction of mineral oil Not liable to deduct at source.(S.40(a)(i),44AB) The assessee had during the relevant previous year, paid for offshore drilling services and machinery repairs /rentals varying amounts to M/s. International Tubular F2E and International OffshoreManagementbothofwhichwerenonresidententities.Onsuchpayments,theassessee deductedtaxat4percentconsideringthe,servicesrenderedbythenonresidentsentitiesfallunder section44BoftheAct.Asperassesseeonly10percent,ofthereceiptscouldbedeemedincomeand 40percentofsuch10percentworksout4percent.However,AssessingOfficerwasoftheopinion thattheassesseewasrequiredtodeductat40percent,onthegrosssumpaidtosuchentitiesunder section195oftheAct.Astheassesseefailedtodeductthetaxatprescribedratehedisallowedthe amount under section 40(a)(ia). In appeal Commissioner (Appeals) held that the assessee had taken a bona fide view hence disallowance was not called for. On the facts the assessee had deductedthetaxatspecifiedrateon10percent,ofthebareboatchargespaidtoNorwaycompany who is nonresident, computed as per the provisions of section 44BB. Therefore, there is no violation of the provisions of section 195, hence no disallowance can be made under section 40(a)(ia)oftheAct.(A.Ys.200506,200607) Dy.CITv.AbanOffshoreLtd.(2012)13ITR180(Chennai)(Trib.) 47 http://www.itatonline.org

 S.195:DeductionatsourceReimbursementofexpensesClearingandforwardingagentNot liabletodeductatsource..(S.40(a)(ia),172,194C) Reimbursementofpaymenttowardsseafreighttransport,CCIcharges,steamfreightchargesand REPOcontainerchargesmadebytheassesseetoC&Fagentswhohavealreadymadethepayment onbehalfoftheassesseeiscoveredundersection172andnotbysection194Cor195andtheagent having already deducted TDS from the transportation charges and shipping bill before making these payments to the principal which have been reimbursed by the assessee, assessee was not liabletodeducttaxatsourcefromsuchpaymentsandconsequently,samecouldnotbedisallowed byinvokingtheprovisionsofsection40(a)(ia).(A.Y.200506) ACITv.MinproIndustries(2012)65DTR113/143TTJ331(Jd.)(Trib.) S. 201:DeductionatsourceAssesseeindefaultTaxpaidbypayeeSuchvicarious liability cannotbeinvoked.(S.191) BythevirtueofinsertionofExplanationtosection191w.e.f.1stJune2003,apersoncanbetreated asanassesseeindefaultundersection201(1),onlywhenthereislapseindeductionatsourceon hispartandinadditiontothislapse,therecipientofincomehasalsofailedtopaysuchtaxdirectly. The reasons are not difficult to fathom. Proceedings under section 201(1) are not penal proceedings.Thesearevicariousproceedingstomakegoodtheshortfallintaxcollectionandwhen thetaxliabilityisdulydischargedbytherecipientofincomeembeddedinpayment,suchvicarious liabilitycannotbeinvoked.Unlikesection271C,201(1)isnotofpenalinnature.(A.Ys.200607to 200910) ChhattisgarhStateElectricityBoardv.ITO(2012)65DTR1(Mum.)(Trib.) S.201:DeductionatsourceAssesseeindefaultAppealCommissioner(Appeals)Appealis maintainable.(S.246A) The Commissioner (Appeals) held that the Assessing Officer has passed an order levying the interest under section 201 hence the appeal is not maintainable. The Tribunal held that order passedundersection201isappealable.(A.Ys.200708to200910) CanaraBankv.Dy.CIT(TDS)(2012)134ITD1(Lucknow)(Trib.) S.201:DeductionatsourceAssesseeindefaultSalaryPerquisiteConcessionaleducation AssesseeisliabletopayinterestIncometaxRules,1962,Rule3(5).[S.201(IA)] While computing the perquisite value of free /concessional education provided by assessee towardsitsteachers/staff,thecostofeducationperstudentexceedsRs.1000permonth,entire perquisitevalueshallbereckonedinthehandsofrecipientandtheassesseedeductedtaxatsource consideringonlyRs.1000permonthperchildindeterminingthesuchperquisitethereoccurreda resultantshortdeductionoftaxatsource,hencetheassesseeisliabletobetreatedasassesseein defaultundersection201(1)andinterestundersection201(IA).(A.Y.200304) CITv.Director,DelhiPublicSchool(2012)66DTR149(P&H)(HighCourt) S. 206C:Collection at source ScrapImporter and dealer in recycled ferrous and ferrous metalsNotliabletopaytax.. Assessee, an importer and dealer in recycled ferrous and non ferrous metals, was not liable to collecttaxatsourceundersection206Cfromthesaleofsaidrecycledmetalstomanufacturersand to other traders as the scrap sold is not the scrap as defined in Explanation (b) to section 206C, sincescrapsoldwasneithergeneratedfromthemanufactureormechanicalworkingofmaterials. Thescrapwasneithersoldnorusableassuch.InviewofthematterCommissioner(Appeals),was 48 http://www.itatonline.org

 notjustifiedinupholdingtheordersundersections206(6)/206(7)passedbytheAssessingOfficer directingtheassesseetopaythetax.(A.Ys.2009102010&2011). NathulalP.Lavtiv.ITO(201265DTR133/133TTJ509(Rajkot)(Trib.) S. 220: Collection and recoveryAssessee deemed in default Stay Stay has to be granted whenassessedincomeismorethan47timesofincomedeclared. IncomeassessedbytheAssessingOfficerwas47timesofincomedeclaredbyassessee.Therefore instructionNo.95dated21stAugust,1969holdsthefield.Thereforeassesseecannotbetreatedas assesseeindefault.(A.Y.200809) MaheswariAgroIndustriesv.UOI(2012)246CTR113/65DTR129(Raj.)(HighCourt) S. 226:Collection and recovery of taxGarnishee proceedings Attachment Search and seizureFixeddepositofthirdpartiesattachmentisheldtobenotvalid.(S.132,222,281B, Art.226) Assesseewassearchedandarticleswereseized.Articleswerereleasedonbankguaranteeonbasis of fixed deposits receipts of third parties. Department issuedgarnishee proceedings against bank and attached the fixed deposits under section 226(3).Department passed the provisional attachment under section 281B.Department invoking the bank guarantee en cashed the fixed deposit.Assesseechallengedthe orderbyway ofWrit,theCourtheldthattheencashmentofthe fixeddepositwasunjustified.TheCourtheldthatthefixeddepositsnotbelongingtoassesseehence attachmentoffixeddepositreceiptswerenotvalid. GopalDasKhandewalandothersv.UOI(2012)340ITR235(All)(HighCourt) S. 234A:InterestAdavnce taxSearch and seizure Cash seized from third partyTribunal directedtheAssessingOfficertoadjustthecashseizedagainstadvancetaxliability..(S.132, 234B,234C) Asearchandseizurewascarriedoutatthepremisesoftheassesseeandcashwasseized.Assessee requested that the seized cash be treated as advance tax paid and adjust it against cash liability. However the Assessing Officer has not adjusted the cash seized. The Tribunal held that the cash seized from third party was found to be the cash of the assessee and this fact was not disputed. Thereforethecashseizedfromthethirdparty orthecashseizedfromtheassesseewouldretain the same character and did not affect processing of such seized cash. Accordingly the Tribunal directedtheAssessingOfficertoadjusttheseizedcashagainstadvancetaxliabilityfromthedateof seizureitself.(A.Y.200809) RamS.Sardav.Dy.CIT(2012)13ITR457(Rajkot)(Trib.) S. 234B: InterestAdvance tax AssessmentReassessmentInteret is payable from orginal orderofassessment.(S.143(3),147) Originalorderofassessmentwasdated2461991andorderofreassessmentwason2811994. Theinterestundersection234Bwaspayablefromoriginalorderofassessment. VijayKumarSaboo(HUF)andanotherv.ACIT(2012)340ITR382(Karn.)(HighCourt) S.234D:InterestRefundRegularassessmentDateonwhichtheregularassessmentorder hasbeenpassed. The Court held that since the regular assessment had been completed on March 30, 2004 and section234DcameintooperationonandfromJune1,2003,whichwaspriortothecompletionof the regular assessment, the assessee was liable to pay interest on the excess refund amount 49 http://www.itatonline.org

 receivedascontemplatedundersection234DoftheAct.Itisnottheyearofassessmentthatfalls for consideration in such circumstances, but the date on which the regular assessment order has beenpassed.(A.Y.200102) CITv.InfrastructureDevelopmentFinanceCo.Ltd.(2012)340ITR580(Mad.)(HighCourt) S.245R:AdvancerulingsInternationaltransactionPendencyofproceedingsApplicationis notmaintainable.(S.44BBB,195) The applicant is a public sector company. It has entered in to an offshore services contract with AtomstroyExportRussia(ASE)forsettingupapowerplantintheStateofTamilNadu.Accordingto the applicant, the income from such contracts is taxable under section 44BBB of the Act. It had enteredintofourcontractswithASE.Theapplicantstatedthatitwasassessedtotaxfortheyears 200607 and 200708 pursuant to the directions of the Dispute Resolution Panel and it was held that payments received by ASE, under off shore services are covered by section 44BBB. The applicantapproachedtheAuthorityforarulingonthequestionwhetherASEischargeabletotax aspertheActorundertheDoubleAvoidanceConventionbetweenIndiaandRussiainrespectof thepaymentmadebyNPCILtoASEunderoffshoresupplycontracts.TheAuthorityheldthatsince thequestionwhetherthepaymentmadeunderthetransactionwaschargeabletotaxundertheAct waspendingbeforetheauthoritiesundertheActarisingoutofanassessmentagainst,beforethe applicantapproachedtheAuthorityseekingrulingtoknowitsTaxdeductedatsourceobligations, hencetheapplicationisbarredbyclause(i)oftheprovisotosection245R(2). NuclearPowerCorporationofIndiaLtd.(2012)65DTR99/246CTR165/204Taxman181(AAR) S.245R:AdvancerulingsInternationaltransactionPendencyofproceedingsDeductionat sourceApplicationisnotmaintainable.(S.40(a)(i),195) Whentheissueispendinginappeal,applicationforAdvanceRulingisnotmaintainable.Onfactsit was found that the decision of Assessing Officer whether tax to be deducted on payment to non resident was challenged before the Authorities and was pending hence the Authority held that applicationisnotmaintainable. FosterPte.Ltd.(2012)340ITR246(AAR) S. 245R: Advance rulingsInternational transactionPendency of proceedings Rectification ofmistakeDismissedtheapplication.(S.245Q) Application of the assessee was not admitted on the ground that return filed by assessee and thereforematterpendingbeforeAssessingOfficer.Assesseefiledtherectificationapplicationbased on certain observation in the hand book published by the Authority for Advance Rulings. The Authority for Advance Rulings held that Hand Book cannot control the rendering a decision with reference to the relevant provisions. It also clarified that the Hand Book referred the situation whereanoticeisissuedcallingupontheapplicanttofileareturn.Itdoesnotdealwithasituation whereareturnhasbeenfiledwithintimeallowedundersection139(1).AccordinglytheAuthority hasnotentertainedtheapplicationforrectificationofmistakeanddismissedtheapplication. SepcoIIIElectronicPowerConstruction(No.2)(2012)340ITR231(AAR) S.246A: Appeal Commissioner (Appeals) Maintainability Merger Revision is not maintainable.(S.264) Oncetheassesseeapproachesundersection264andorderispassed,theassessmentordermerges with the order of revision, hence the assessee cannot file an appeal before the Commissioner 50 http://www.itatonline.org

 (Appeals)undersection246A,astheappealfiledafterrejectionofpetitionundersection264isnot maintainable.(A.Y.200607) Orissa Rural Housing Development Corporation Ltd. v. ACIT (2012) 66 DTR 73/247 CTR 137 (Orissa)(HighCourt) S. 246A:Appeal Commissioner (Appeals) Deduction at source InterestAssessee in defaultAppealismaintainable.(S.201) The Commissioner (Appeals) held that the Assessing Officer has passed an order levying the interest under section 201 hence the appeal is not maintainable. The Tribunal held that order passedundersection201isappealable.(A.Ys.200708to200910) CanaraBankv.Dy.CIT(TDS)(2012)134ITD1(Lucknow)(Trib.) S. 250:Appeal Commissioner (Appeals)Additional evidence CBDT circular can not be treatedasadditionalevidence.(IncometaxRules,1962Rule46A) Circular issued by CBDT cannot be termed as an additional evidence in appeal and, therefore, it cannot be said that Commissioner (Appeals) was not justified in admitting circular No. 723, dt.19thSeptember,1995andconsideringthesamewithoutaffordingopportunityofhearingtothe AssessingOfficer.(A.Y.200506) ACITv.MinproIndustries(2012)65DTR113/143TTJ331(Jd.)(Trib.) S.251:AppealCommissioner(Appeals)StayPowerRecoveryCommissioner(Appeals) hasthepowertostaytherecovery.(S.220) Commissioner(Appeals)haveinherentimpliedandancillarypowerstograntstayagainstrecovery ofdisputeddemandoftaxwhiletheappealfiledbeforethemundersection246or246Aispending. TheCourtobservedthatallthefirstappellateauthorityincasesofotherappellantassesseewithin StateofRajasthanalsowouldentertainstayapplicationsfiledbeforethemduringthependencyof appealsandwoulddecidethesameontheirownmeritsinfuture.(A.Y.200809) MaheswariAgroIndustriesv.UOI(2012)246CTR113/65DTR129(Raj.)(HighCourt) S. 251: Appeal Commissioner (Appeals)Additional ground Raised first time before Commissioner(Appeals)Additionalgroundadmitted. Assesseedidnotclaimdeductionundersection80Cinthereturnbuttookuptheclaimbywayofa letterwithoutrevisingthereturn.AssessingOfficerdisallowedtheclaim.OnappealCommissioner (Appeals)alsodidnotallowtheclaim.TheTribunalheldthattheAppellateAuthoritystillhasthe power to entertain the claim, accordingly the order of Commissioner was set aside and matter remittedtothefileoftheAssessingOfficer,withadirectiontoconsidertheclaim.(A.Y.200607) PradeepKumarHarlakav.ACIT(2012)65DTR157/143TTJ446(Mum.)(Trib.) S.254:AppellateTribunalBindingPrecedentContemptTribunalsorderisbindingand failuretofollowitisContemptofCourt. ThoughtheTribunalintheassesseesowncaseheldthatexemptionundersection11wasavailable andthefactswereidentical,theCIT(A),forasubsequentyear,declinedtofollowitinteraliaonthe ground that the DR had not advanced arguments before the Tribunal in a comprehensive and effectivemanner.Theassesseefiledanappealdemandingexemplarycostsundersection254(2B). HeldbytheTribunalafteracomprehensivereviewofthelawonthesubject: ItiswellsettledthattheTribunalisexercisingjudicialfunctionsandhasallpowersofaCourt.The proceeding before the Tribunal are deemed to be judicial proceedings. It appears to be the 51 http://www.itatonline.org

 impression/misunderstandingofsometaxofficialsthattheordersoftheITATinterpretingthelaw cannotbebindingasitisafactfindingauthority.However,thisisnotcorrectbecausethedecision ofahigherauthorityinthejudicialhierarchyisbindingonallthelowerauthoritiesbelowtheline. Hence, the Assessing Officer and Commissioner(Appeals) are bound by the decision rendered by the jurisdictional Tribunal. Refusal to follow the order of the ITAT would render that authority guilty of committing contempt of Tribunal for which the concerned authority is liable to be proceeded against. If the decision of the Tribunal is found to be unacceptable to the authorities below, the right course to follow is to carry the matter in appeal to the High Court and to seek suspensionoftheoperationoftheorderoftheTribunal.ApersonoccupyingthechairofCIT(A)is expectedtobeawareofjudicialdisciplineandthebindingnatureoftheTribunalsorder.Toavoid harassmenttotheassesseeandunpleasantcircumstances,theCBDTshouldtakeappropriatesteps toenlightenallofficialstoensurethatjudicialdisciplineismaintained.Costsundersection254(2B) canbegrantedonlyiffrivolousappealsarefiledandnotinacaselikethis.However,theassesseeis free to take proper steps for initiating contempt proceeding against the CIT(A) (Ajay Gandhi and anotherv.B.Singh andothers(2004)265ITR451(SC),ITATv.V.K.Agarwalandanother(1999) 235 ITR 175 (SC) &Agarwal Warehousing and Leasing Ltd. v.CIT (2002) 257 ITR 235 (MP) followed) CargoHandlingPrivateWorkersPoolv.Dy.CIT(Vishakhapatanam)(Trib.)www.itatonline.org S.254(2):AppellateTribunalMistakeapparentonrecordBaddebtsAppealHighCourt Writismainatinable.(S.36(1)(vii),260A,Article226) DecisionofAppellateTribunaldisallowingforbaddebtsdisregardingthelegalpositionassettled bytheSupremeCourtandtheamendmentinlaww.e.f.1stApril,1989thereisanapparentmistake in the order of Tribunal and therefore, Tribunal was not justified in rejecting the miscellaneous applicationfiledbytheassesseeandnotrectifyingthesaidmistake.NoappealliesbeforetheHigh Court under section 260A against the order passed under section 254(2) and therefore writ petitionfiledbytheassesseeagainsttheorderofTribunalrejectingthemiscellaneousapplication cannot be dismissed on the ground that the assessee has alternative remedy by way of appeal undersection260A.(A.Y.19992000) Madhav Marbles & Granites v. Incometax Appellate Tribunal (2012) 65 DTR 217/ 246 CTR 243 (Raj.)(HighCourt) S. 260A: Appeal to High Court Order of Appellate Tribunal Mistake apparent on record WritAppealisnotmaintainable..(S.254(2),Article226) No appeal lies before the High Court under section 260A against the order passed under section 254(2)andthereforewritpetitionfiledbytheassesseeagainsttheorderofTribunalrejectingthe miscellaneous application cannot be dismissed on the ground that the assessee has alternative remedybywayofappealundersection260A.(A.Y.19992000) Madhav Marbles & Granites v. Incometax Appellate Tribunal (2012) 65 DTR 217/ 246 CTR 243 (Raj.)(HighCourt) S. 263:Revision of orders prejudicial to revenueDropping penalty proceedingsRevsion is justified. Commissioner under section 263, can revise the order passed by the Assessing Officer dropping penalty proceedings. The word proceedings under section 263 is broad enough to include droppingpenaltyproceedings.(A.Y.200405) R.A.HimmatsingkaandCo.v.CIT(2012)340ITR253(Patna)(HighCourt) 52 http://www.itatonline.org

 S. 263:Revision of orders prejudicial to revenue DeductionExport of mica products MineraloreRevisionisjustified..(S.80HHC) Assessee exported the goods which are made by converting mica into pieces of specific sizes and thesamelostitscharacterasgoodsandmerchandiseofthecategorynamelymineraloreshence claimed the deduction under section 80HHC, which was allowed by the Assessing Officer. The Commissioner revised the order under section 263 on the ground that Assessing Officer gave the benefitofsection80HHCnotwithstandingthefactthatthelegislaturehadexcludedtheoperationof section 80HHC in respect of goods and merchandise of mineral items processed by the assessee. HighCourtupheldtherevisionorderpassedbytheCommissioner.(A.Y.199091) JaiMicaSupplyCo.(P)Ltd.v.CIT(2012)246CTR280(Cal.)(HighCourt) S.263:RevisionofordersprejudicialtorevenueDepreciationPlantTerminalbuilding Revisionisnotjustified.(S.32) Airports Authority of India uses the terminal building for regulation of air traffic and communicational and Navigational control and use of said building for passengers was only incidental, therefore, Assessing Officer was justified in treating entire terminal building as plant and allowing depreciation, hence revision under section 263 may not be justified.(A.Ys. 199596 and199798to200102) AirportsAuthorityofIndiav.CIT(2012)134ITD34(Delhi)(Trib.) S.263:RevisionofordersprejudicialtorevenueCapitalgainsBusinessincomeInvestment insharesRevisionorderisnotjustified..(S.28(i),45) If an Assessing Officer acting in accordance with law makes certain assessment, same cannot be brandedaserroneousbyCommissionersimplybecausehedisagreeswithviewofAssessingOfficer or according to him order should have been written more elaborately. Section 263 does not visualizeacaseofsubstitutionofjudgmentofCommissionerforthatofAssessingOfficer,unlessthe decision is held to be erroneous. Assessee was holding equity shares of various companies as investment, income arising from sale of investment would be assessable as long term/short term capitalgainsandnotasbusinessincome.Revisionorderundersection263wasnotjustified.(A.Y. 200607) ManishKumarv.CIT(2012)134ITD27(Indore)(Trib.) S. 263: Revision of orders prejudicial to revenueComputation deduction under section 80HHFAdjustmentofbroughtforwardlossesLegalpositiontobeseenwhenexercisingthe revision jurisdiction and not when the Assessing Officer passed the orderRevision held to bevalid.. Assessing Officer allowed the deduction under section 80HHF, before setting off the losses of broughtforwardfromearlieryears.Commissionerpassedtheorderundersection263revisingthe order.OnappealtotheTribunaltheTribunalheldthatforthepurposeofexaminingthevalidityof revisionproceedings,whatoneneedstoexaminethelegalpositionprevailingasonthetimewhen revisionpowersareexercisedbythecommissionerandnotwhentheAssessingOfficerpassedthe orderatthepointoftime.Accordinglyrevisionorderheldtobevalid.(A.Y.200304) StarIndiaLtd.v.Addl.CIT(2012)65DTR169/143TTJ307(Mum.)(Trib.) S. 263: Revision of orders prejudicial to revenue Transfer pricingComputation Arms lengthpriceRevisionorderheldtobeinvalid.(S.92C) 53 http://www.itatonline.org

 AssessingOfficerhascompletedthe assessment of assessee by acceptingexportsalesmadebyit. Commissionerpassedtherevisionorderonthegroundthatassesseehadenteredintointernational transaction as it had made export sales and the Assessing Officer has passed the order without referring the matter to TPO for determination of ALP. Tribunal held that no part of total export turnover related to any sales made by to any associated concern and more over no evidence had beenbroughtonrecordbyCommissionertoeffectthatinternationaltransactionsbywayofmutual agreement/arrangementwithassociatedenterprises.Astheprovisionof section92C itselfisnot applicabletheordercannotbeheldtoerroneous.Tribunalalsoheldthattheordermaybebriefor crypticbutthatbyitselfisnotsufficienttobrandassessmentorderaserroneousorprejudicialto interest of revenue. As regards the cash credits the Assessing Officer had made proper enquiries, deputedtheinspector,whoexaminedthereturnoflenders,bankstatement,etc.hencetheorderof revision was not proper. The Tribunal quashed the order and decided the issue in favour of assessee.(A.Y.200405) MaithanInternationalv.ACIT(2012)134ITD393(Kol.)(Trib.) S.263:RevisionofordersprejudicialtorevenueDepreciationAirCraftRevisionisnot justifiedisentitleddepreciationat40%.(S.32) Air Craft owned by assessee not Aeroplane, hence entitled to depreciation at 40%. All air crafts whetherlighterthanairorheavierthanairwereaircrafts.Noaircraftscouldeverbetermedas anaeroenginebecauseanaeroenginewasnotanaircraftoraeroplaneatall.Itwasonlypower unitofanaircraft.TheTribunalsetasidetherevisionorderofCommissioneronmeritandheldthat depreciationisallowableat40%.(A.Y.200506to200708) SRCAviationP.Ltd.v.Dy.CIT(2012)13ITR600(Delhi)(Trib.) S. 269UA: Purchase of immoveable property by Central Government Under statementof considerationFailuretoapplymindConflictingfindingofauthorityPreemptivepurchase wasnotvalid. While passing the order for preemptive purchase of property the authorities have not taken into considerationmarketvalueofproperty,therewasconflictingfindingbyAuthorities,hence,thepre emptivepurchasewasheldtobenotsustainableandthepropertyrevestsintransferors. PandharinathBhikajiTelge and others v. Appropriate Authority and others (2012) 340 ITR 420 / 66 DTR42(Bom.)(HighCourt) S.271(1)(c):Penalty ConcealmentAnnualvalue ofleasedpropertyNotionalincomeLevy ofpenaltyisupheld. Assessee has leased the property to a Bank for a sum of Rs. 1 lakh per annum as per lease agreement. The assessee has also received interest free deposit of Rs. 67 crores. In the course of assessment proceedings the assessee filed the valuation report of an approved valuer who estimatedtheannuallettingvalueoftotalconstructedarealeasedatRs.75,63,360/,aspersection 23(1)(a).The penalty levied by the Assessing officer was confirmed by the Tribunal. On further appealtotheHighCourt,theCourtheldthattheassesseehasdivertedtheinterestfreeamountto its sister concerns without any interest. The court held that the explanation of assessee was not bonafide hence Explanation 1 to section 271(1)(c)of the Act would fully applicable and the AssessingOfficerwasjustifiedinlevyingthepenalty.(A.Y.200607) PSBIndustriesIndia(P)Ltd.v.CIT(2012)65DTR400(Delhi)(Court)

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 S. 271(1)(c):Penalty ConcealmentUntenable claim of bad debtWrite off of the share application money advanced to another company Converting into interest bearing loan Penaltyisjustified. AssesseehasdepositedanamountofRs.50lacswithDimensionInvestmentsandSecuritiesLtd.as share application money, however no shares were allotted to the assessee and therefore the assesseechosetoexercisetheoptionofconvertingtheshareapplicationmoneyintoloanbearing interestat22%compoundedquarterly.Theassesseewroteofftheamountasbaddebt.TheCourt observedthatnointerestonsaidadvanceshadbeenofferedandassessedtotaxinanyearlieryears and that in fact no interest was charged and claim which was ultimately disallowed by the High Court, it is a case where the assessee failed to particulars, furnished in accurate particulars of incomeandtherewaslackofbonafideonthepartofassessee,therefore,penaltywassustainable. (A.Y.200001) KanchenjungaAdvertising(P)Ltd.v.CIT(2012)66DTR137/246DTR409(Delhi)(HighCourt) S. 271(1)(c): Penalty Concealment Deduction Export Amendment in law ManufacturingLevyofpenaltyisnotjustified.(S.80HHHC,80IB) Assessing Officer disallowed the claim of deduction under section 80HHC, on export incentive by applyingtheprovisionsinsertedbytheTaxationLaws(Amendment)Act,2005,whichdidnotexist atthetimeoffilingofthereturn,assesseecannotbesaidtohavefurnishedinaccurateparticulars of income and levy of penalty was not justified. Assessee also disclosed the complete particulars regarding the claim under section 80IB, in its return which was accompanied by audit report, penaltyundersection271(1)(c)cannotbeleviedasthedisallowanceofclaimbeingdebatable.(A. Ys.200203and200405). ACITv.PerfectForgings(2012)143TTJ117(Chd.)(Trib.) S.271(1)(c):PenaltyConcealmentAdditionalDepreciationPenaltyisdeleted. Assetsinstalledandputtouseinsecondhalfofyear,depreciationclaimedat50percentageofrate allowableinthatyear,balanceofdepreciationallowableinnextyear.Additionaldepreciationwas disallowed.Levyofpenaltywasnotjustified.(A.Ys.200405,200506,200607) Dy.CITv.CosmoFilmsLtd.(2012)13ITR340(Delhi)(Trib.) S. 271(1)(c):Penalty Concealment Opinion of Chartered Accountant Bonafide claim Chartered Accountants opinion does not necessarily make claim bona fide.Penalty is confirmed. TheassesseeobtainedtheopinionofaCharteredAccountantonwhetherexpenditureonfeestothe Registrar of Companies for increasing authorized capital can be claimed as revenue expenditure. TheCAreliedonjudicialprecedentsandopinedthattheissuewasdebatableandaclaimcouldbe made on the basis that if two views were possible, the view in favour of the assessee should be taken. The assessee claimed deduction and even the tax auditor did not qualify the same. The AssessingOfficerrelyingonPunjabStateIndustrialDevelopmentCorp.225ITR792(SC)&Brooke Bond225ITR798(SC)disallowedtheclaimandleviedsection271(1)(c)penaltywhichwasupheld bytheCIT(A).BeforetheTribunal,theassesseepleadedthatasithadreliedontheopinionofan expertinmakingtheclaim,itsactionwasbonafide&penaltycouldnotbelevied.HELDdismissing theappeal: InviewofthetwodecisionsoftheSupremeCourtwhichheldthefieldwhenthereturnwasfiled, the claim was patently disallowable. The claim was also not discernible on the face of the record andthedetailsofexpenseshadtobegoneintoinordertodeciphertheclaim.Theargumentthat 55 http://www.itatonline.org

 the assessee does not have expertise in taxation matters and so it relied on expert opinion is not acceptablebecausetheopinionwasfurnishedforaccountingpurposes.Anaccountantsviewisnot really material for deciding the deductibility or otherwise of an expenditure. The assessee knew abouttheproblematthetimeoffilingofreturn,butstillmadetheclaim.Notonlythis,theclaim waspursuedevenuptotheleveloftheCIT(A)ingrossdisregardforthedecisionoftheSupreme Court, which the assessee came to know at least after receiving the assessment order. Therefore, theclaimwasnotonlywrongbutalsofalseanditwaspersistedwithforsometime.Thefactthat theassesseedidnotevenseekexplanationfromthetaxauditorortheCAgavetheimpressionthat thewholethingwasasham. ChadhaSugarsPvt.Ltd.v.ACIT(Delhi)(Trib.)www.itatonline.org S. 271(1)(c):Penalty Concealment Search Despite surrender after detection Penalty is deleted.(S.153A) Pursuanttoasearch&section153Aassessmentonthebasisofseizedpapers,statements,etc;the assesseeofferedadditionalincomeofRs.2.68croresonthebasisthathewasunabletoexplainthe oldrecords.SomeoftheotheradditionsmadebytheAssessingOfficerwerepartlydeletedbythe CIT(A) & Tribunal. The Assessing Officer &CIT(A) levied section 271(1)(c) penalty on the ground that the assessees offer of additional income was not voluntary or bona fide. On appeal by the assesseetotheTribunal,HELDallowingtheappeal: Though the assessee owned the unaccounted transactions only after search action, when an assesseeadmitshismistakeandthathehascommittedawrongandofferstheadditionalincometo tax,itcannotbesaidthathisstatementisfalseornotbonafide.NeithertheCIT(A)northeTribunal were completely clear about the exact amount of concealment and there was no conclusive evidence as some additions had been deleted. Section 271(1)(c) gives discretion to the Assessing Officer to exonerate the assessee from levy of penalty even in case where the assessee has concealedtheincomeorfurnishedincorrectparticularsofincome.Penaltyshouldnotbeimposed merelybecauseitislawfultodoso.TheAssessingOfficerhastoexercisehisdiscretionjudiciously. Ifanassesseefilesarevisedreturnthoughatalaterstageordisclosestrueincome,penaltyneed not be levied. No doubt, merely offering additional income will not automatically protect the assesseefromlevyofpenaltybutinagivencasewheretheassesseecameforwardwithadditional income though after detection because he was not in a position to explain the seized material properlyandexpressesremorseinhisconductunhesitantly,theAssessingOfficerhastoexercise the discretion in favour of such assessee as otherwise the expression may in section 271(1)(c) becomes redundant. In a case of admitted income, concealment penalty is not automatic. The discretionvestedintheAssessingOfficershouldbeusednottolevypenalty.Onfacts,thecasewas most befitting to exercise such discretion because there was divergent opinion while deleting or sustaining the addition and there was no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. The assessees offer was to avoid litigation. If the AssessingOfficerhadclinchingevidenceofconcealment,heshouldnothaveacceptedtheassessees offer and should have proceeded on the basis of material on record (VIP Industries 112 TTJ 289, SiddharthEnterprises184TM460(P&H)&ReliancePetroProducts322ITR158(SC)followed). P.V.RamanaReddyv.ITO(Hyd.)(Trib.)www.itatonline.org S. 271(1)(c):Penalty Concealment Survey Search and Seizure Disclosure of income Explanation4&5Penaltyisdeleted.(S.153C) AssesseehadsurrenderedasumofRs.1.60croresduringthecourseofsurvey/searchandseizure operation. Assessee on its own, furnished its return of income before the issuance of the notice 56 http://www.itatonline.org

 undersection153CwhereinithaddeclaredadditionalincomeofRs.1.60crores,theTribunalheld thatlevyofpenaltywasrightlydeletedbytheCommissioner(Appeals).(A.Y.200506) ACITv.JupiterDistillery(2012)66DTR121(Ahd.)(Trib) S. 282: Service of notice Search and seizure Service of notice is held validBlock assessmentValidity(S.132,143(2),158BC) Notice dated 17th October,1997 was served by hand and has been received and bears signature /initials but the name of the recipient is not stated/ mentioned. By notice under section 143(2) dated 24thOctober 1997, the Assessing Officer had required the assessee to furnish details as per questionnaire attached. The assessee by letter dated 17thNovember 1997 filed various details. Therewasnoallegationthattheappellantwasnotservedwiththenoticeundersection158Bdated 17thOctober1997.TheCourtheldthatsection282providesthatnoticemaybeservedonaperson eitherbypostorasifsummonswereissuedbyaCourtundertheCPCOrderVoftheCPCprescribes the mode,procedure and the manner of service of notices. The object and purpose of service of notice/ summons is to inform and initiate the addressee about the proceedings and the date of hearing.Ifthenoticeisservedorreceivedbythepartyconcernedandthisisestablished,thenthe manner and mode of service is not relevant. On the facts it was established that notice under section 158BC was served on a person who had represented the assessee and only on that basis replyto noticeundersection143(2) wasfiled,assesseecannotclaimnonserviceofnoticeunder section158BCandcannotchallengetheassessmentasinvalid. VenadProperties(P)Ltd.v.CIT(2012)65DTR258(Delhi)(HighCourt) S. 288 : Authorised representative Appellate Tribunal Members of ExITAT members As interimmeasureExITATMemberspermittedtopracticebeforeBencheswheretheywere notpostedAdvocatesAct,1961S.30.(S.254) Rule13EoftheIncomeTaxAppellateTribunalMembers(RecruitmentandConditionsofService) Rules,1963notifiedonJune3,2009imposesabanonthepracticebyretiredmembersbeforethe Incometax Appellate Tribunal. The Petitioner, a retired member of the Tribunal, filed a writ petitiontochallengethesaidRuleasbeingultravirestheprovisionsofsection288oftheActand section30ofAdvocatesAct1961.HeldbytheHighCourtgrantinginterimrelief: Though, prima facie, the Rule appears to be a correct notification supposedly issued in public interestinlinewiththerulesandpracticeclampingbanonthelegalpracticebytheretiredjudges of High Court in the courts where they remain posted as permanent judge and the Tribunals and CourtssubordinatetoHighCourt,however,itappearstobeoffensiveintworespects;namely,that theretiredmembershavebeencompletelybarredfrompracticebeforetheTribunal,andsecondly, thattheaforesaidRule13Ehasbeeninterpretedtoapplyretrospectivelyinthejudgmentrendered inthecaseofConceptCreationsv.ACIT(2009120ITD19(Delhi)(SpecialBench)bytheIncometax AppellateTribunal,Delhi,beyonditspaleofcompetenceasithasthejurisdictiontodecideonlythe matters relating to tax appeals as contained in the Incometax Act vide Sections 253 and 254 thereof. Hence, issue notice to opposite party No.3 to show cause as to under what jurisdiction and authority,theTribunalhasinterpretedRule13Easaforesaidinthejudgmentpassedinthecaseof ConceptCreations(supra)tothedisadvantageoftheretiredmembersbyimposingacompleteban onthepracticebeforetheTribunal. Thepetitionermayservethisnoticedastiaswell.

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 Tillthenextdateofhearing,operationoftheimpugnedRule13Easwellasthejudgmentinthecase ofConceptCreationsshallremainstayedinsofarastheyimposeacompletebanonthepracticeby retiredmembersbeforetheTribunal. Thus,itwouldbeopenfortheretiredmemberstopracticebeforetheBenchesofTribunalwhere theyhadnotremainedpostedandheldCourtstemporarilyoronregularbasis. DineshChandraAgarwalv.UOI(All)(HighCourt)www.itatonline.org Interpretation of statuteIncometax Act, 1961 National Housing Bank Act, 1987 Overridingeffect. TheNHBAct1987wasenactedtopromotehousingfinanceinstitutionsbothatlocalandregional levelstoprovidefinancialandothersupporttosuchinstitutions.Thereisnoprovisionunderthe said Act which says that NHB Act will have overriding effect of Incometax Act, 1961. Since the Assessment orders are passed under the Incometax Act, the provisions of Incometax Act is applicableandNHBAct1987doesnotoverridetheIncometaxAct,1961. Orissa Rural Housing Development Corporation Ltd. v. ACIT (2012) 66 DTR 73/ 247 CTR 137 (Orissa)(HighCourt) InterpretationofstatutePrecedentPerincuriamIgnoranceofearlierdecision. A decision which is rendered in ignorance of an earlier decision of a coordinate Bench of equal strength which covered the case before it does not have precedent value.The Tribunal followed theratioofPunjabLandDevelopment&ReclamationCorpn.Ltd.v.PresidingOfficer,LabourCourt (1990)3SCC682andCITv.B.R.Constructions(1993)202ITR222(AP)(FB) ACITv.PramodH.Lele(2012)66ITR134(Mum.)(Trib.) InterpretationoftaxingstatuteTaxavoidanceandtaxplnanning. The honourable court in Vodafone International Holdings B.V. v.UOI has once again the approved that tax palnning is permissible and not tax evasion. At para 116 observed as under A five Judges Bench judgment of this court in Mathuram Agrwal v. State of Madya Pradesh(1999)8SCC667afterreferringtothejudgmentofinCITv.B.M.Kharwar(1969)1 SCC 651(supra) as well as the opinion expressed by Lord Roskill on Duke of westminister stated that the subject is not to be taxed by inference or analogy , but only by the plain wordsofastatuteapplicabletothefactsandcircumstancesofeachcase. 117. Revenue can not tax a subject without a statute to support and in the course we also acknowledgethateverytaxpayerisentitledtoarrangehisaffirassothathistaxesshallbe aslowaspossibleandthatheisnotboundtochoosethatpatternwhichwillreplenishthe treasury. Revenues stand that the ratio laid down in Macdowell is contrary to what has beenlaiddowninAzadiBachaoAndolan,inourview,isunsustainableandtherefore,calls fornoreconsiderationbyalargerBranch(Bench) VodafoneInternationalHoldingsB.V.v.UOI(2012)341ITR1/204Taxman408/247CTR1/ 66DTR265(SC). AdvocatesAct,1961Professional misconduct Professional ethics and morality.(S.35 of the AdvocatesAct,1961) Itisnotonlyundesirablebuthighlyunethicalonpartofappellanttohavecreatedtitleoratleast havingattemptedtocreatetitletohiminrespectofwhichlitigationwaspendinginCourtandhe was representing one of parties in that litigation. The Court also observed that settlement with complainant would not mitigate or wipe out professional misconduct and must not prevent adequatepunishmenttoappellant.TheCourtheldthatapersonpracticinglawhasanobligationto 58 http://www.itatonline.org

 maintainprobityandhighstandardofprofessionalethicsandmorality.Onthefactstheadvocates certificateofpracticewassuspendedforthreemonths. DhanrajSinghChoudhryv.NathulalVishwakarma(2012)204Taxman124(SC) REFERENCERTOARTICLES. S. 4: Income The concept of real income in income taxation by RamuKrishnamurthi (2012) 246 CTR(Articles)67 S. 10(23C)(vi):Conditions precedent for exemption under section 10(23C)(vi) of the Incometax Act,1961ByM.Govindrajan(2012)204Taxman33(Mag.) S.14A:BusinessexpenditureDelhiHighCourtsElucidationofsection14AoftheIncometaxAct, 1961byT.N.Pandey(2012)246CTR(Articles)57 S. 37(1): Business expenditure Loopholes in section 37(1), Explanation 1 Exposed By MinuAgarwal(2012)246CTR(Articles)53. S. 50 : Setoff brought forward business losses against capital gains under section 50 By PradipKapasi&GautamNayak437(2012)43BBCAJJanuary2012P.49 S. 54F : Deduction under section 54F of the Incometax Act, 1961 By AmitAgarwal and PankajArora(2012)204Taxman38(Mag.) S.80I(2)(iv):EligibilityoncontractualworkersforinclusioninnumberofworkersbyPradipKapasi, GautamNayak,AnkitVirendraSudhaShah,562(2012)43BBCAJJannuary2012P.42 S.132:SearchandseizureAssessmentofundisclosedincomedetectedasaresultofPostSearch inquiriesByM.S.Prasad(2012)246CTR(Articles)62. S. 145: Anticipated losses Mother of all controversies by C.A. DindayalDhandaria (2012) 204 Taxman69(Mag.) S.252:TribunalsPresidentisnotempoweredtowriteACRsofmembersAnanalysisofUttamBir Singh Bedi v.UOI (2011) 16 Taxman.com 399 (Mad.) by Rahul Dhawan (2012) 204 Taxman 105 (Mag.) S. 263: Revision Suomotu revision by Commissioner analysis in view of recent judgment of the CalcuttaHighCourtbyCAUmaKothari(2012)340ITR53(Journal) General A. AppealFirstAppealandStayofdemandIncometaxReviewJanuary2012Vol.XXXVIINo.10. I. InterpretationLegitimacyofreferencetoOECDcommentaryforinterpretationofIncometaxAct andDTAAsByAnkitVirendraSudhaShah529(2012)43BBCAJFeb.2012P9. P. 59 http://www.itatonline.org

 Principle of natural Justice particularly in relation to Tax Laws by K.H.Kaji assisted by Manish K.Kaji,Advocates(2012)340ITR63(Journal) V. Off shore Voluntary compliance amnesty scheme: International experience by T.C.A.Ramanujam& T.C.A.Sangeetha(2012)204Taxman41(Mag.) Companies Act Revised Schedule VI to the Companies Act,1956 Income Tax Review. February,2012Vol.XXXVIINo.11 Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this digest, the existence of mistakes and omissions herein is not ruled out. Neither the authors nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org.

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